**UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

 
| **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |
|----------------------------------------------------------------------------------------------|
|                                                                                         |
| **For  the quarterly period ended September 30, 2002**                                       |
|                                                                                         |
| **Commission File Number:  000-26091**                                                  |

 

| **TC PipeLines, LP**                                            |
|-----------------------------------------------------------------|
| (Exact name of registrant as specified in its charter)          |
|                                                            |   |   |
| **Delaware**                                                    |   | **52-2135448** |
| (State or other jurisdiction of incorporation  or organization) |   | (I.R.S. Employer Identification  Number) |
|                                                            |   |   |
| **110 Turnpike Road, Suite 203  Westborough, Massachusetts**    |   | **01581** |
| (Address of principal executive offices)                        |   | (Zip code) |
|                                                            |   |   |
| **508-871-7046**                                                |
| (Registrant’s telephone number, including area code)       |

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

Yes  ý   No  o

 

As of November 8, 2002 therewere 15,627,129 of the registrant’s common units outstanding.

 

 

----

 

**TC PipeLines, LP**

 

**Table ofContents**

** **
| PART I.   FINANCIAL INFORMATION |
|-------------------------------------------|
|                                      |   |   |
|                                      | ITEM 1. | Financial Statements |
|                                      |   |   |
|                                      |   | Statement  of Income – Three and nine months ended September 30, 2002 and 2001 |
|                                      |   | Statement of  Comprehensive Income – Three and nine months ended September 30, 2002 and  2001 |
|                                      |   | Balance Sheet – September 30, 2002 and  December 31, 2001 |
|                                      |   | Statement  of Cash Flows – Nine months ended September 30, 2002 and 2001 |
|                                      |   | Notes to  Condensed Financial Statements |
|                                      |   |   |
|                                      | ITEM 2. | Management’s Discussion and Analysis of  Financial Condition and Results of Operations |
|                                      |   |   |
|                                      |   | Results  of Operations of TC PipeLines, LP |
|                                      |   | Liquidity  and Capital Resources of TC PipeLines, LP |
|                                      |   | Results  of Operations of Northern Border Pipeline Company |
|                                      |   | Liquidity  and Capital Resources of Northern Border Pipeline Company |
|                                      |   | Results  of Operations of Tuscarora Gas Transmission Company |
|                                      |   | Liquidity  and Capital Resources of Tuscarora Gas Transmission Company |
|                                      |   |   |
|                                      | ITEM 3. | Quantitative and Qualitative Disclosures about  Market Risk |
|                                      |   |   |
|                                      | ITEM 4. | Controls and Procedures |
|                                      |   |   |
| PART II.    OTHER INFORMATION   |
|                                      |   |   |
|                                      | ITEM 6. | Exhibits and Reports on Form 8-K |

 

2

----

 

**PARTI.  FINANCIAL INFORMATION**

 

**ITEM1.  FINANCIAL STATEMENTS**

 

**TC PipeLines, LP**

 

**Statement of Income**

** **

| ***(unaudited)******(thousands of  dollars, except per unit amounts)*** |     | **Three months  ended  September 30** |       | **Nine months  ended  September 30** |     |
|-------------------------------------------------------------------------|----------|---------------------------------------|------------|--------------------------------------|----------|
|                                                                    | **2002** |                                  | **2001**   |                                 | **2002** |   | **2001** |   |
| Equity Income  from Investment in Northern Border Pipeline Company      |     | **11,759**                            | ** ** | 10,662                               |     | **34,612** | ** ** | 30,918 |   |
| Equity Income  from Investment in Tuscarora Gas Transmission Company    |     | **1,192**                             | ** ** | 841                                  |     | **3,305** | ** ** | 2,620 |   |
| General and  Administrative Expenses                                    |     | **(403**                              | **)**      | (326                                 | )        | **(1,084** | **)** | (982 | ) |
| Financial  Charges                                                      |     | **(100**                              | **)**      | (205                                 | )        | **(249** | **)** | (828 | ) |
| Net Income                                                              |     | **12,448**                            | ** ** | 10,972                               |     | **36,584** | ** ** | 31,728 |   |
|                                                                    |     |                                  |       |                                 |     |   |   |   |   |
| **Net Income Allocation**                                               |     |                                  | ** ** |                                 |     |   | ** ** |   |   |
| Common units                                                            |     | **10,445**                            | ** ** | 8,891                                |     | **29,938** | ** ** | 25,773 |   |
| Subordinated  units                                                     |     | **1,494**                             | ** ** | 1,700                                |     | **5,222** | ** ** | 4,928 |   |
| General partner                                                         |     | **509**                               | ** ** | 381                                  |     | **1,424** | ** ** | 1,027 |   |
|                                                                    |     | **12,448**                            | ** ** | 10,972                               |     | **36,584** | ** ** | 31,728 |   |
|                                                                    |     |                                  |       |                                 |     |   |   |   |   |
| Net Income per  Unit                                                    |     | **$**                                 | **0.68**   | ** **                           | $        | 0.60 |   | **$** | **2.01** | ** ** | $ | 1.75 |   |
| Units  Outstanding (thousands)                                          |     | **17,500**                            | ** ** | 17,500                               |     | **17,500** | ** ** | 17,500 |   |
|                                                                         |          |                                       |            |                                      |          |  |  |  |  |  |  |  |  |

 

**Statement of Comprehensive Income**

 
| ***(unaudited)  (thousands of dollars)***                   |     | **Three months  ended  September 30** |     | **Nine months  ended  September 30** |       |
|-------------------------------------------------------------|----------|---------------------------------------|----------|--------------------------------------|------------|
|                                                        | **2002** |                                  | **2001** |                                 | **2002**   |   | **2001** |   |
| Net Income                                                  |     | **12,448**                            |     | 10,972                               | ** ** | **36,584** |   | 31,728 |   |
| Other  Comprehensive Income                                 |     |                                  |     |                                 |       |   |   |   |   |
| Transition  adjustment from adoption of SFAS No. 133        |     | **—**                            |     | —                               | ** ** | **—** |   | 3,104 |   |
| Change  associated with current period hedging transactions |     | **(118**                              | **)**    | (3,614                               | )          | **(816** | **)** | (1,332 | ) |
| Total  Comprehensive Income                                 |     | **12,330**                            |     | 7,358                                | ** ** | **35,768** |   | 33,500 |   |

 

See accompanying Notes to Condensed FinancialStatements.

 

3

----

 

**Balance Sheet**

 
| ***(thousands of dollars)***                      |   | **September  30,  2002** |   | **December  31,  2001** |   |
|---------------------------------------------------|--------|--------------------------|--------|-------------------------|--------|
|                                              |   | **(unaudited)**          |   |                    |   |
| **Assets**                                        |   |                     |   |                    |   |
| Current Assets                                    |   |                     |   |                    |   |
| Cash                                              |   | **5,499**                |   | 9,194                   |   |
|                                              |   |                     |   |                    |   |
| Investment in  Northern Border Pipeline Company   |   | **247,408**              |   | 250,078                 |   |
| Investment in  Tuscarora Gas Transmission Company |   | **33,656**               |   | 29,297                  |   |
| Deferred Amounts                                  |   | **188**                  |   | 119                     |   |
|                                              |   | **286,751**              |   | 288,688                 |   |
|                                              |   |                     |   |                    |   |
| **Liabilities and Partners’ Equity**         |   |                     |   |                    |   |
| Current  Liabilities                              |   |                     |   |                    |   |
| Accounts payable                                  |   | **496**                  |   | 426                     |   |
| Accrued interest                                  |   | **28**                   |   | 58                      |   |
|                                              |   | **524**                  |   | 484                     |   |
|                                              |   |                     |   |                    |   |
| Long-Term Debt                                    |   | **11,500**               |   | 21,500                  |   |
|                                              |   |                     |   |                    |   |
| Partners’ Equity                             |   |                     |   |                    |   |
| Common units                                      |   | **226,435**              |   | 218,935                 |   |
| Subordinated  units                               |   | **40,166**               |   | 39,229                  |   |
| General partner                                   |   | **5,934**                |   | 5,532                   |   |
| Accumulated  other comprehensive income           |   | **2,192**                |   | 3,008                   |   |
|                                              |   | **274,727**              |   | 266,704                 |   |
|                                              |   | **286,751**              |   | 288,688                 |   |

 

**Statement of Cash Flows**

** **
|                                                           |   | **Nine months ended  September 30** |       |
|----------------------------------------------------------------|--------|-------------------------------------|------------|
| ***(unaudited) (thousands of dollars)***                       |   | **2002**                            |       | **2001** |   |
| **Cash Generated from Operations**                             |   |                                | ** ** |   |   |
| Net income                                                     |   | **36,584**                          | ** ** | 31,728 |   |
| Add/(Deduct):                                                  |   |                                | ** ** |   |   |
| Distributions  received in excess of/(less than) equity income |   | **2,048**                           | ** ** | (449 | ) |
| Decrease/(increase)  in operating working capital              |   | **40**                              | ** ** | (47 | ) |
|                                                           |   | **38,672**                          | ** ** | 31,232 |   |
| **Investing Activities**                                       |   |                                | ** ** |   |   |
| Investment in  Tuscarora Gas Transmission Company              |   | **(4,508**                          | **)**      | — |   |
| Deferred amounts                                               |   | **(114**                            | **)**      | (61 | ) |
|                                                           |   | **(4,622**                          | **)**      | (61 | ) |
| **Financing Activities**                                       |   |                                | ** ** |   |   |
| Distributions  paid                                            |   | **(27,710**                         | **)**      | (26,166 | ) |
| Repayment of  long-term debt                                   |   | **(10,000**                         | **)**      | — |   |
| Subordinated  unit conversion                                  |   | **(35**                             | **)**      | — |   |
|                                                           |   | **(37,745**                         | **)**      | (26,166 | ) |
| **(Decrease)/Increase in Cash**                                |   | **(3,695**                          | **)**      | 5,005 |   |
| **Cash, Beginning of Period**                                  |   | **9,194**                           | ** ** | 1,566 |   |
| **Cash, End of Period**                                        |   | **5,499**                           | ** ** | 6,571 |   |

 

See accompanying Notes to Condensed FinancialStatements.

 

4

----

 

**Notesto Condensed Financial Statements**

**(unaudited)**

 

**Note 1****             Basis of Presentation**

** **

TC PipeLines, LP, and its subsidiary limited partnerships, TC PipeLinesIntermediate Limited Partnership and TC Tuscarora Intermediate LimitedPartnership, all Delaware limited partnerships, are collectively referred toherein as TC PipeLines or the Partnership. The Partnership commenced operations on May 28, 1999.

 

The financial statements have been prepared bymanagement in accordance with United States generally accepted accountingprinciples.  Other comprehensive incomerecorded by TC PipeLines arises through its equity investments in NorthernBorder Pipeline Company (Northern Border Pipeline) and Tuscarora GasTransmission Company (Tuscarora) and relates to cash flow hedges transacted byNorthern Border Pipeline and Tuscarora. Amounts are stated in United States dollars.

 

Since a determination of many assets, liabilities,revenues and expenses is dependent upon future events, the preparation of thesefinancial statements requires the use of estimates and assumptions which havebeen made using careful judgment.  Inthe opinion of management, these financial statements have been properlyprepared within reasonable limits of materiality and include all adjustments(consisting primarily of normal recurring accruals) necessary to present fairlythe results of operations for the three and nine months ended September 30,2002 and 2001, the financial position as at September 30, 2002 and December 31,2001 and cash flows for the nine months ended September 30, 2002 and 2001.

 

The results of operations for the three and ninemonths ended September 30, 2002 and 2001 are not necessarily indicative of theresults that may be expected for a full fiscal year.  The interim financial statements should be read in conjunctionwith the Partnership’s financial statements and notes included in TC PipeLines’Annual Report on Form 10-K for the year ended December 31, 2001.

 

**Note 2****             Investment inNorthern Border Pipeline Company**

 

The Partnership owns a 30% general partner interest in Northern BorderPipeline, a partnership which owns a 1,249-mile United States interstatepipeline system that transports natural gas from the Montana-Saskatchewanborder to markets in the midwestern United States.  The remaining 70% partnership interest in Northern BorderPipeline is held by Northern Border Partners, L.P., a publicly traded limitedpartnership.  The 2% general partnershipinterest in Northern Border Partners, L.P. is controlled by affiliates of EnronCorp. (Enron), which hold a 1.65% general partner interest, and TransCanadaPipeLines Limited (TransCanada), parent of TC PipeLines’ general partner, whichholds the remaining 0.35% general partner interest.  The Northern Border pipeline system is operated by NorthernPlains Natural Gas Company, a wholly owned subsidiary of Enron.  Northern Border Pipeline is regulated by theFederal Energy Regulatory Commission (FERC).

 

The Northern Border pipeline system serves more than50 firm transportation shippers with diverse operating and financialprofiles.  Enron North America Corp.(ENA), an affiliate of Enron that has filed for Chapter 11 bankruptcyprotection, was a party to shipper contracts obligating ENA to pay demandcharges for approximately 3.4% of Northern Border Pipeline’s capacity.  Northern Border Pipeline has advised TCPipeLines that at September 30, 2002, this pipeline capacity has been deemedrejected and terminated.  NorthernBorder Pipeline has further advised it has posted the

 

5

----

 

available capacity and awarded portions of the capacity at maximumrates as allowed under its tariff for varying terms.  For the nine months ended September 30, 2002, Northern BorderPipeline has experienced lost revenues of approximately $1.8 million related toENA’s capacity, with TC PipeLines’ share equating to approximately $0.5million.

 

TC PipeLines uses the equity method of accounting forits investment in Northern Border Pipeline. TC PipeLines’ equity income for the three and nine months endedSeptember 30, 2002 and 2001 represents 30% of the net income of Northern BorderPipeline for the same periods.  Retainedearnings of TC PipeLines at September 30, 2002 and December 31, 2001 includeundistributed earnings from Northern Border Pipeline of $3.6 million and $5.7 million,respectively.  The following sets outsummarized financial information representing 100% of the operations ofNorthern Border Pipeline for the three and nine months ended September 30, 2002and 2001 and as at September 30, 2002 and December 31, 2001.

 

6

----

 
|                                           |   | **Three months  ended  September 30** |       | **Nine months  ended  September 30** |   |
|------------------------------------------------|--------|---------------------------------------|------------|--------------------------------------|--------|
| ***(millions of dollars)***                    |   | **2002**                              |       | **2001**                             |   | **2002** |   | **2001** |   |
| **Northern  Border Pipeline Income Statement** |   |                                  |       |                                 |   |   | ** ** |   |   |
| Revenues                                       |   | **81.6**                              | ** ** | 77.9                                 |   | **239.9** | ** ** | 231.9 |   |
| Costs and  expenses                            |   | **(15.2**                             | **)**      | (15.6                                | )      | **(42.6** | **)** | (43.9 | ) |
| Depreciation                                   |   | **(14.5**                             | **)**      | (14.2                                | )      | **(43.5** | **)** | (42.9 | ) |
| Financial  charges                             |   | **(13.2**                             | **)**      | (12.7                                | )      | **(39.9** | **)** | (41.5 | ) |
| Other  income/(expense)                        |   | **0.5**                               | ** ** | 0.2                                  |   | **1.5** | ** ** | (0.5 | ) |
| Net income                                     |   | **39.2**                              | ** ** | 35.6                                 |   | **115.4** | ** ** | 103.1 |   |

 

Northern Border Pipeline has recorded other comprehensive income of$(0.4) million and $(12.1) million, for the three months ended September 30,2002 and 2001, respectively and $(2.1) million and $5.9 million (includingtransition adjustment of $10.3 million) for the nine months ended September 30,2002 and 2001, respectively.

 
| ***(millions of dollars)***                 |   | **September  30  2002** |   | **December  31,  2001** |   |
|---------------------------------------------|--------|-------------------------|--------|-------------------------|--------|
|                                        |   |                    |   | **(audited)**           |   |
| **Northern Border Pipeline Balance  Sheet** |   |                    |   |                    |   |
| **Assets**                                  |   |                    |   |                    |   |
| Cash and cash  equivalents                  |   | **28.0**                |   | 11.0                    |   |
| Other current  assets                       |   | **37.9**                |   | 36.3                    |   |
| Plant, property  and equipment, net         |   | **1,649.3**             |   | 1,685.7                 |   |
| Other assets                                |   | **36.3**                |   | 18.9                    |   |
|                                        |   | **1,751.5**             |   | 1,751.9                 |   |
| **Liabilities and Partners’ Equity**   |   |                    |   |                    |   |
| Current  liabilities                        |   | **120.4**               |   | 399.0                   |   |
| Reserves and  deferred credits              |   | **5.4**                 |   | 5.6                     |   |
| Long-term debt,  net of current maturities  |   | **801.0**               |   | 513.7                   |   |
| Partners’ equity                       |   |                    |   |                    |   |
| Partners’  capital                     |   | **817.6**               |   | 824.4                   |   |
| Accumulated  other comprehensive income     |   | **7.1**                 |   | 9.2                     |   |
|                                        |   | **1,751.5**             |   | 1,751.9                 |   |

 

**Note 3****             Investment inTuscarora Gas Transmission Company**

 

The Partnership owns a 49% general partner interest in Tuscarora, apartnership that owns a 229-mile United States interstate pipeline system thattransports natural gas from Oregon, where it interconnects with facilities ofPG&E National Energy Group, Gas Transmission Northwest, to northernNevada.  The remaining general partnerinterests in Tuscarora are held 50% by Sierra Pacific Resources and 1% byTransCanada.  The Tuscarora pipelinesystem is operated by Tuscarora Gas Operating Company, a wholly ownedsubsidiary of Sierra Pacific Resources. Sierra Pacific Power Company, a subsidiary of Sierra Pacific Resources,is Tuscarora’s largest shipper, accounting for approximately 94% of Tuscarora’savailable capacity.  Tuscarora isregulated by the FERC.

 

7

----

 

The Partnership uses the equity method of accountingfor its investment in Tuscarora.  TCPipeLines’ equity income for the three and nine months ended September 30, 2002and 2001 represents 49% of the net income of Tuscarora for the sameperiods.  Retained earnings of TCPipeLines at each of September 30, 2002 and December 31, 2001 includeundistributed earnings from Tuscarora of $0.6 million.  The following sets out summarized financialinformation representing 100% of the operations of Tuscarora for the three andnine months ended September 30, 2002 and 2001 and as at September 30, 2002 andDecember 31, 2001.

 
|                            |   | **Three months   ended  September 30** |       | **Nine months   ended  September 30** |   |
|---------------------------------|--------|----------------------------------------|------------|---------------------------------------|--------|
| ***(millions of dollars)***     |   | **2002**                               |       | **2001**                              |   | **2002** |   | **2001** |   |
| **Tuscarora  Income Statement** |   |                                   | ** ** |                                  |   |   | ** ** |   |   |
| Revenues                        |   | **5.6**                                | ** ** | 5.3                                   |   | **16.8** | ** ** | 15.8 |   |
| Costs and  expenses             |   | **(0.6**                               | **)**      | (0.7                                  | )      | **(2.0** | **)** | (1.9 | ) |
| Depreciation                    |   | **(1.2**                               | **)**      | (1.2                                  | )      | **(3.5** | **)** | (3.5 | ) |
| Financial  charges              |   | **(1.3**                               | **)**      | (1.5                                  | )      | **(4.4** | **)** | (4.7 | ) |
| Other income                    |   | **0.2**                                | ** ** | —                                |   | **0.5** | ** ** | 0.3 |   |
| Net income                      |   | **2.7**                                | ** ** | 1.9                                   |   | **7.4** | ** ** | 6.0 |   |

 

Tuscarora has recorded other comprehensive income of less than $0.1million and nil for the three months ended September 30, 2002 and 2001,respectively, and $(0.4) million and nil for the nine months ended September30, 2002 and 2001, respectively.

 
| ***(millions of dollars)***                |   | **September  30,  2002** |   | **December  31,  2001** |   |
|--------------------------------------------|--------|--------------------------|--------|-------------------------|--------|
|                                       |   |                     |   | **(audited)**           |   |
| **Tuscarora Balance Sheet**                |   |                     |   |                    |   |
| **Assets**                                 |   |                     |   |                    |   |
| Cash and cash  equivalents                 |   | **1.1**                  |   | 1.1                     |   |
| Other current  assets                      |   | **2.1**                  |   | 2.1                     |   |
| Plant, property  and equipment, net        |   | **143.4**                |   | 121.3                   |   |
| Other assets                               |   | **1.2**                  |   | 1.6                     |   |
|                                       |   | **147.8**                |   | 126.1                   |   |
| **Liabilities and Partners’ Equity**  |   |                     |   |                    |   |
| Current  liabilities                       |   | **12.3**                 |   | 7.7                     |   |
| Long-term debt,  net of current maturities |   | **87.7**                 |   | 80.0                    |   |
| Partners’ equity                      |   |                     |   |                    |   |
| Partners’  capital                    |   | **47.7**                 |   | 37.9                    |   |
| Accumulated  other comprehensive income    |   | **0.1**                  |   | 0.5                     |   |
|                                       |   | **147.8**                |   | 126.1                   |   |

 

**Note 4****             Credit Facilities andLong-Term Debt**

 

On September 30, 2002, the Partnership renewed its unsecured creditfacility (Revolving Credit Facility) with Bank One, NA, as agent of the creditfacility.  Under the renewed RevolvingCredit Facility, the Partnership may borrow up to an aggregate principal amountof $20 million.  Loans under theRevolving Credit Facility bear interest at a floating rate.  The Revolving

 

8

----

 

Credit Facility matures on July 31, 2004.  Amounts borrowed may be repaid in part or in full prior to thattime without penalty.  The RevolvingCredit Facility may be used to finance capital expenditures and for othergeneral purposes.  At September 30, 2002and December 31, 2001, the Partnership had borrowings of $11.5 million and$21.5 million, respectively, outstanding under the Revolving CreditFacility.  The fair value of the RevolvingCredit Facility approximates its carrying value because the interest rate is afloating rate.  The interest rate on theRevolving Credit Facility averaged 2.9% and 4.6% for the three months endedSeptember 30, 2002 and 2001, respectively, 2.8% and 5.8% for the nine monthsended September 30, 2002 and 2001, respectively, and was 2.9% and 3.0% atSeptember 30, 2002 and December 31, 2001, respectively.

 

9

----

 

On May 28, 2001, the Partnership renewed its $40million unsecured two-year revolving credit facility (TransCanada CreditFacility) with TransCanada Pipeline USA Ltd., an affiliate of the generalpartner.  The TransCanada CreditFacility bears interest at London Interbank Offered Rate plus 1.25%. The purposeof the TransCanada Credit Facility is to provide borrowings to fund capitalexpenditures, to fund capital contributions to Northern Border Pipeline,Tuscarora, and any other entity in which the Partnership directly or indirectlyacquires an interest, to fund working capital and for other general businesspurposes, including temporary funding of cash distributions to partners, ifnecessary.  At September 30, 2002 andDecember 31, 2001 the Partnership had no amount outstanding under theTransCanada Credit Facility.

 

**Note 5****             Net Income per Unit**

 

Net income per unit is computed by dividing net income, after deductionof the general partner’s allocation, by the weighted average number of commonand subordinated units outstanding.  Thegeneral partner’s allocation is equal to an amount based upon the generalpartner’s 2% interest, adjusted to reflect an amount equal to incentivedistributions.  Net income per unit wasdetermined as follows:

 
|                                                            |   | **Three months  ended  September 30** |       | **Nine months  ended  September 30** |   |
|-----------------------------------------------------------------|--------|---------------------------------------|------------|--------------------------------------|--------|
| ***(thousands of dollars, except per  unit amounts)***          |   | **2002**                              |       | **2001**                             |   | **2002** |   | **2001** |   |
| Net income                                                      |   | **12,448**                            | ** ** | 10,972                               |   | **36,584** | ** ** | 31,728 |   |
| Net income  allocated to general partner                        |   | **(249**                              | **)**      | (219                                 | )      | **(732** | **)** | (635 | ) |
| Adjustment to  reflect incentive distribution income allocation |   | **(260**                              | **)**      | (162                                 | )      | **(692** | **)** | (392 | ) |
|                                                            |   | **(509**                              | **)**      | (381                                 | )      | **(1,424** | **)** | (1,027 | ) |
| Net income  allocable to units                                  |   | **11,939**                            | ** ** | 10,591                               |   | **35,160** | ** ** | 30,701 |   |
| Weighted average  units outstanding (thousands)                 |   | **17,500**                            | ** ** | 17,500                               |   | **17,500** | ** ** | 17,500 |   |
| Net income per  unit                                            |   | **$**                                 | **0.68**   | ** **                           | $      | 0.60 |   | **$** | **2.01** | ** ** | $ | 1.75 |   |
|                                                                 |        |                                       |            |                                      |        |  |  |  |  |  |  |  |  |

 

**Note 6****             Subordinated UnitConversion**

 

On August 1, 2002, 936,435 subordinated units, representing one-thirdof the outstanding subordinated units held by the general partner, wereconverted into an equal number of common units as provided for in the amendedand restated partnership agreement of TC PipeLines.

 

**Note 7****             Distributions**

 

On October 22, 2002, the Partnership declared a cash distribution of$0.525 per unit for the quarter ended September 30, 2002.  The distribution totaling approximately $9.6million is payable on November 14, 2002 to unitholders of record as of October31, 2002.  The Partnership has declaredaggregate cash distributions totaling approximately $28.2 million (aggregate$1.55 per unit) relating to the nine months ended September 30, 2002.

 

10

----

 

**ITEM 2.****MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS**

 

**Cautionary Statement RegardingForward-Looking Information**

 

This quarterly report includes forward-looking statements regardingfuture events and the future financial performance of TC PipeLines, LP.  All forward-looking statements are based onthe Partnership’s beliefs as well as assumptions made by and informationcurrently available to the Partnership. Words such as “believes”, “expects”, “intends”, “forecasts”, “projects”,and similar expressions, identify forward-looking statements within the meaningof the Private Securities Litigation Reform Act.  These statements reflect the Partnership’s current views withrespect to future events and are subject to various risks, uncertainties andassumptions including:

 

**•**                                          regulatorydecisions, particularly those of the Federal Energy Regulatory Commission(FERC);

 

•                                          majoritycontrol of the Northern Border Pipeline Company management committee byNorthern Plains Natural Gas Company and Pan Border Gas Company, affiliates ofEnron Corp., which has filed for bankruptcy protection and has put these Enronaffiliates up for sale;

 

•                                          thefailure of a shipper on either one of the Partnership’s pipelines to performits contractual obligations, including Sierra Pacific Power Company, theshipper of approximately 94% of Tuscarora Gas Transmission Company’s capacity;

 

•                                          costof acquisitions;

 

•                                          futuredemand for natural gas;

 

•                                          overcapacityin the industry; and

 

•                                          prevailingeconomic conditions, particularly conditions of the capital and equity markets;

 

and other risks discussed in the Partnership’s filings with theSecurities and Exchange Commission (SEC), including the Partnership’s AnnualReport on Form 10-K for the year ended December 31, 2001.  If one or more of these risks oruncertainties materialize, or if the underlying assumptions prove incorrect,actual results may vary materially from those described in the forward-lookingstatements.

 

**Resultsof Operations****of TCPipeLines, LP**

 

TC PipeLines, LP was formed in 1998 as a Delawarelimited partnership to acquire, own and participate in the management of UnitedStates based pipeline assets.  TCPipeLines, LP, and its subsidiary limited partnerships, TC PipeLinesIntermediate Limited Partnership, and TC Tuscarora Intermediate LimitedPartnership, all Delaware limited partnerships, are collectively referred toherein as TC PipeLines or the Partnership. TC PipeLines GP, Inc., a wholly owned subsidiary of

 

11

----

 

TransCanada PipeLines Limited, is the general partnerof the Partnership.  The Partnershipowns a 30% general partner interest in Northern Border Pipeline and a 49%general partner interest in Tuscarora Gas Transmission Company.

 

***Investment inNorthern Border Pipeline Company***

 

Northern Border Pipeline owns a 1,249-mile United States interstatepipeline system that transports natural gas from the Montana-Saskatchewanborder to markets in the midwestern United States.  The Partnership acquired its 30% interest in Northern BorderPipeline from affiliates of its general partner.  The Partnership has one member and 30% of the voting power of theNorthern Border Pipeline management committee.

 

12

----

 

The remaining 70% general partner interest in Northern Border Pipelineis held by Northern Border Partners, L.P., a publicly traded limitedpartnership.  The general partners ofNorthern Border Partners are Northern Plains and Pan Border, both Enronaffiliates, and Northwest Border Pipeline Company.  On August 16, 2002, TransCanada announced that it acquired 100%of the outstanding common stock of Northwest Border Pipeline from The WilliamsCompanies, Inc.  As a result of theacquisition, TransCanada has one member and 12.25% of the voting power on theNorthern Border Pipeline management committee. TransCanada and TC PipeLines now collectively have two members and anaggregate 42.25% of the voting power of the Northern Border Pipeline managementcommittee.  Northern Plains and PanBorder collectively have two members and 57.75% of the voting power of theNorthern Border Pipeline management committee. Northern Plains also serves as the operator of the Northern Borderpipeline system.  Northern BorderPipeline has advised the Partnership that Enron is seeking to sell itsownership interests in each of Northern Plains and Pan Border (see “Update onthe Impact of Enron’s Chapter 11 Filing on Northern Border Pipeline’sBusiness”).

 

***Investment inTuscarora Gas Transmission Company***

 

Tuscarora owns a 229-mile United States interstatepipeline system that transports natural gas from Oregon, where it interconnectswith facilities of PG&E National Energy Group, Gas Transmission Northwest,to northern Nevada.  The Partnershipacquired its 49% interest in Tuscarora from affiliates of its general partnerin September 2000. ** **Theremaining general partner interests in Tuscarora are held 50% by Sierra PacificResources and 1% by TCPL Tuscarora Ltd., an indirect subsidiary ofTransCanada.  The Tuscarora pipelinesystem is operated by Tuscarora Gas Operating Company, a wholly ownedsubsidiary of Sierra Pacific Resources. Sierra Pacific Power Company, a subsidiary of Sierra Pacific Resources,is Tuscarora’s largest shipper, accounting for approximately 94% of Tuscarora’savailable capacity.

 

On January 30, 2002, the FERC approved an expansion of Tuscarora’spipeline system.  The addition of two compressorstations to be located along the Tuscarora mainline as well as an 11-milepipeline extension from Tuscarora’s current terminus near Reno, Nevada toWadsworth, Nevada is within budget and on schedule to be completed at the endof November of this year.  Service isscheduled to commence in December.  Theexpansion is expected to result in a 43% increase (approximately 55 millioncubic feet per day) to Tuscarora’s current transportation capacity, increasingTuscarora’s capacity to approximately 182 million cubic feet per day.   The new capacity is fully contracted forterms ranging from ten to fifteen years. Terms of these transportationcontracts allow for approximately 70% of the new volumes to flow upon commencementof service.  The remaining 30% of newvolumes are expected to be flowing by the end of 2003.

 

The second phase of the expansion that would have further increasedTuscarora’s capacity by an additional 40 million cubic feet per day by the endof 2003 was cancelled due to the termination of the precedent

 

13

----

 

agreement that supported this capacity.  Tuscarora has advised the Partnership that it has initiated theprocess to amend its FERC certificate to remove the second phase from theproposed expansion.  The expansion had acapital budget of $60 million, consisting of approximately $43 million for thefirst phase and approximately $17 million for the second phase.  With the cancellation of the second phase,Tuscarora has removed $17 million from the capital budget of theexpansion.  Further, the Partnershipexpects the actual capital expenditures for the first phase to come in under$43 million.

 

On March 29, 2002, the Public Utility Commission of Nevada (PUCN)disallowed the recovery by Nevada Power Co., a subsidiary of Sierra PacificResources, of approximately $437 million of the approximate $922 million indeferred energy costs sought by Nevada Power. Nevada Power is allowed to recover the remaining $485 million indeferred energy costs over the next three years.  As a result, Sierra Pacific Resources’ credit rating forunsecured debt, as well as such credit rating for its subsidiaries, SierraPacific Power and Nevada Power, were downgraded by Standard & Poor’s, aDivision of The McGraw-Hill Companies, Inc., and Moody’s Investor Services,Inc. to below investment grade.  On May28, 2002, the PUCN disallowed the recovery by Sierra Pacific Power, ofapproximately $55 million of the approximate $205 million in deferred energycosts sought by Sierra Pacific Power. Sierra Pacific Power is allowed to recover the remaining $150 million indeferred energy costs over the next three years.  Sierra Pacific Resources has announced that it is appealing bothof the decisions of the PUCN with the Nevada courts.  While TC PipeLines has no current indication that Sierra PacificPower is in default under its contractual obligations to Tuscarora, TCPipeLines is unable to predict the future financial condition of Sierra PacificPower and, accordingly, its long-term ability to meet its obligations underexisting agreements with Tuscarora including Tuscarora Gas Operating Company’sobligation under the operating agreement with Tuscarora.

 

***Critical AccountingPolicy***

 

TC PipeLines accounts for its investments in both Northern BorderPipeline and Tuscarora using the equity method of accounting as detailed innotes two and three to the financial statements.  The equity method of accounting is appropriate where the investordoes not control but is able to exercise significant influence over theoperating and financial policies of an investee.  TC PipeLines is able to exercise significant influence over itsinvestments in Northern Border Pipeline and Tuscarora as evidenced by its representationon their respective management committees.

 

***Third Quarter 2002Compared with Third Quarter 2001***

 

Net income increased $1.4 million, or 13%, to $12.4million for the third quarter of 2002, compared to $11.0 million for the sameperiod

 

14

----

 

last year. This increase is primarily due to increased equity income from thePartnership’s investments in Northern Border Pipeline and Tuscarora.

 

Equity income from the Partnership’s investment inNorthern Border Pipeline increased $1.1 million, or 10%, to $11.8 million forthe third quarter of 2002, compared to $10.7 million for the same period lastyear.  Approximately $1.0 million of theincrease is due to incremental revenues from Project 2000, Northern BorderPipeline’s 35-mile pipeline extension and expansion which was completed inOctober 2001.

 

Equity income from the Partnership’s investment in Tuscarora increased$0.4 million, or 50%, to $1.2 million for the third quarter of 2002, comparedto $0.8 million for the same period last year. Approximately $0.2 million ofthis increase is due to incremental revenue from new transportationcontracts.  The remaining $0.2 millionof the increase is due to lower interest expense and higher other income,resulting from the capitalization of interest expense and higher equityallowance for funds used during construction related to funds used forTuscarora’s expansion.

 

The Partnership recorded general and administrative expenses of $0.4million and $0.3 million for the third quarter of 2002 and 2001, respectively.

 

The Partnership recorded financial charges of $0.1 million and $0.2million for the third quarter of 2002 and 2001, respectively.

 

***Nine Months EndedSeptember 30, 2002 Compared with Nine Months Ended September 30, 2001***

 

Net income increased $4.9 million, or 15%, to $36.6million for the first nine months of 2002, compared to $31.7 million for thesame period last year.  This increase isprimarily due to increased equity income from the Partnership’s investments inNorthern Border Pipeline and Tuscarora and a reduction in financial charges.

 

Equity income from the Partnership’s investment inNorthern Border Pipeline increased $3.7 million, or 12%, to $34.6 million forthe first nine months of 2002, compared to $30.9 million for the same periodlast year.  Approximately $3.0 millionof the increase is due to incremental revenues from Project 2000 which ispartially offset by approximately $0.5 million relating to uncollected revenuesassociated with transportation capacity held by Enron North America Corp.(ENA), an affiliate of Enron that has filed for Chapter 11 bankruptcyprotection (see “Update on the Impact of Enron’s Chapter 11 Filing on NorthernBorder Pipeline’s Business”). Approximately $0.8 million of the increase is dueto lower operations and maintenance expenses resulting primarily from adecrease in employee benefits and

 

15

----

 

administrative expenses.  Approximately $0.4 million of the increase is due to lowerinterest expense resulting from decreases in average interest rates.  In addition, equity income from NorthernBorder Pipeline was $0.5 million lower in 2001 due to a charge relating to anuncollectible receivable from a telecommunications company that had purchasedexcess capacity on Northern Border Pipeline’s communication system.  These increases were partially offset by a$0.5 million decrease in equity income resulting from the impact of netreductions to previous estimates of ad valorem taxes in 2001 exceedingreductions to previous estimates in 2002.

 

Equity income from the Partnership’s investment inTuscarora increased $0.7 million, or 27%, to $3.3 million for the first ninemonths of 2002, compared to $2.6 million for the same period last year.  Approximately $0.5 million of this increaseis due to incremental revenue from new transportation contracts.  The remaining $0.2 million of the varianceis due to lower interest expense and higher other income, resulting from thecapitalization of interest expense and higher equity allowance for funds usedduring construction related to funds used for Tuscarora’s expansion.

 

The Partnership recorded general and administrative expenses of $1.1million and $1.0 million for the first nine months of 2002 and 2001,respectively.

 

Financial charges of the Partnership decreased $0.6 million to $0.2million for the first nine months of 2002, compared to $0.8 million for thesame period last year.  This decrease isdue primarily to lower average debt balances and lower average interest rates(see “Liquidity and Capital Resources of TC PipeLines, LP — Cash Flows fromFinancing Activities”).

 

**Liquidity and Capital Resources of TCPipeLines, LP**

 

***Conversion of Subordinated Units***

 

On August 1, 2002, 936,435 subordinated units, representing one thirdof the outstanding subordinated units held by the general partner, wereconverted into an equal number of common units as provided for in the amendedand restated partnership agreement of TC PipeLines.

 

***Cash DistributionPolicy of TC PipeLines, LP***

 

During the subordination period, which generally cannot end before June30, 2004, the Partnership will make distributions of available cash as definedin the partnership agreement in the following manner:

 

•                  First,98% to the common units, pro rata, and 2% to the general partner, until therehas been distributed for each outstanding common unit an amount equal to theminimum quarterly distribution for that quarter;

 

16

----

 

•                  Second,98% to the common units, pro rata, and 2% to the general partner, until therehas been distributed for each outstanding common unit an amount equal to anyarrearages in payment of the minimum quarterly distribution on the common unitsfor that quarter and for any prior quarters during the subordination period;

•                  Third,98% to the subordinated units, pro rata, and 2% to the general partner, untilthere has been distributed for each outstanding subordinated unit an amountequal to the minimum quarterly distribution for that quarter; and

•                  Thereafter,in a manner whereby the general partner has rights (referred to as incentivedistribution rights) to receive increasing percentages of excess quarterlydistributions over specified distribution thresholds.

 

***2002 Third QuarterCash Distribution***

 

On October 22, 2002, the board of directors of the general partnerdeclared the Partnership’s 2002 third quarter cash distribution in the amountof $0.525 per unit.  This distributionwill be paid on November 14, 2002 to unitholders of record as of October 31,2002.  The third quarter cashdistribution totaling $9.6 million will be paid in the following manner:  $8.2 million to common unitholders(including $1.5 million to an affiliate of TransCanada as holder of 2,800,000common units and $0.5 million to the general partner as holder of 936,435common units), $1.0 million to the general partner as holder of thesubordinated units, and $0.4 million to the general partner as holder ofincentive distribution rights and in respect of its 2% general partnerinterest.

 

***General***

 

On April 23, 2002, the Partnership filed a shelf registration statementwith the SEC to sell, from time to time, up to $200 million of common unitsrepresenting limited partner interest and/or debt securities.  The Partnership intends to use the net proceedsfor general purposes, repayment of debt, future acquisitions, capitalexpenditures and working capital.

 

***Cash Flows fromOperating Activities***

 

Cash flows provided by operating activities increased $7.5 million, or24%, to $38.7 million for the first nine months of 2002, compared to $31.2million for the same period last year. For the first nine months of 2002 and 2001, the Partnership receivedcash distributions of $36.7 million and $31.4 million, respectively, from itsequity investment in Northern Border Pipeline. The Partnership also received cash distributions of $3.3 million and$1.7 million from its equity investment in Tuscarora for the first nine monthsof 2002 and 2001, respectively. Tuscarora did not make a cash distribution in the first quarter of 2001due to the timing of the implementation of its cash distribution policy.

 

17

----

 

***Cash Flows from Investing Activities***

 

During the first nine months of 2002, the Partnership made an equitycontribution of $4.5 million to Tuscarora related to Tuscarora’s expansionproject.

 

***Cash Flows fromFinancing Activities***

 

In the first nine months of 2002, the Partnership paid $27.7 million incash distributions: $22.4 million to common unitholders, $4.3 million to thegeneral partner as holder of the subordinated units, and $1.0 million to thegeneral partner, as holder of incentive distribution rights and in respect ofits 2% general partner interest.  Thiscompares to cash distributions of $26.2 million, which were paid by thePartnership in the first nine months of 2001.

 

On September 30, 2002, the Partnership renewed its unsecured creditfacility (Revolving Credit Facility) with Bank One, NA, as agent of the creditfacility.  Under the renewed RevolvingCredit Facility, the Partnership may borrow up to an aggregate principal amountof $20 million.  Loans under theRevolving Credit Facility bear interest, at the option of the Partnership, at aone-, two-, three-, or six-month London Interbank Offered Rate (LIBOR) plus1.25% or at a floating rate based on the higher of the federal funds effectiverate plus 0.5% or the prime rate.  TheRevolving Credit Facility matures on July 31, 2004.  Amounts borrowed may be repaid in part or in full prior to thattime without penalty.  The RevolvingCredit Facility may be used to finance capital expenditures and for othergeneral purposes.  In the second quarterof 2002 the Partnership made principal re-payments on the Revolving CreditFacility of $10 million.  At September 30,2002, the Partnership had borrowings of $11.5 million outstanding under theRevolving Credit Facility. The Partnership has not made any additionalborrowings since that date.  Theinterest rate on the Revolving Credit Facility averaged 2.9% and 2.8% for thethree and nine months ended September 30, 2002, respectively and was 2.9% atSeptember 30, 2002.

 

On May 28, 2001, the Partnership renewed its $40 million unsecuredtwo-year revolving credit facility (TransCanada Credit Facility) withTransCanada PipeLine USA Ltd., an affiliate of the general partner.  The TransCanada Credit Facility bearsinterest at LIBOR plus 1.25%.  Thepurpose of the TransCanada Credit Facility is to provide borrowings to fundcapital expenditures, to fund capital contributions to Northern BorderPipeline, Tuscarora, and any other entity in which the Partnership directly orindirectly acquires an interest, to fund working capital and for other generalbusiness purposes, including temporary funding of cash distributions to partners,if necessary.  At September 30, 2002,the Partnership had no amount outstanding under the TransCanada CreditFacility.

 

18

----

 

***CapitalRequirements***

 

To the extent TC PipeLines has any capital requirements with respect toits investments in Northern Border Pipeline and Tuscarora or makes acquisitionsduring the remainder of 2002, TC PipeLines expects to fund these requirementswith operating cash flows, debt and/or equity.

 

Since the interests in Northern Border Pipeline and Tuscarora arecurrently the Partnership’s only significant sources of income, thePartnership’s results of operations are influenced by and reflect the samefactors that influence the financial results of Northern Border Pipeline andTuscarora, respectively.

 

**Results of Operations of NorthernBorder Pipeline Company**

 

The following sets out summarized financial information for NorthernBorder Pipeline for the three and nine months ended September 30, 2002 and 2001and as at September 30, 2002 and December 31, 2001. Amounts discussed represent100% of the operations of Northern Border Pipeline, of which the Partnershiphas held a 30% interest since May 28, 1999.

 
|                                           |   | **Three months  ended  September 30** |       | **Nine months  ended  September 30** |       |
|------------------------------------------------|--------|---------------------------------------|------------|--------------------------------------|------------|
| ***(millions of dollars)***                    |   | **2002**                              |       | **2001**                             |       | **2002** |   | **2001** |   |
| **Northern  Border Pipeline Income Statement** |   |                                  | ** ** |                                 | ** ** |   | ** ** |   |   |
| Revenues                                       |   | **81.6**                              | ** ** | 77.9                                 |       | **239.9** | ** ** | 231.9 |   |
| Costs and  expenses                            |   | **(15.2**                             | **)**      | (15.6                                | )          | **(42.6** | **)** | (43.9 | ) |
| Depreciation                                   |   | **(14.5**                             | **)**      | (14.2                                | )          | **(43.5** | **)** | (42.9 | ) |
| Financial  charges                             |   | **(13.2**                             | **)**      | (12.7                                | )          | **(39.9** | **)** | (41.5 | ) |
| Other  income/(expense)                        |   | **0.5**                               | ** ** | 0.2                                  |       | **1.5** | ** ** | (0.5 | ) |
| Net income                                     |   | **39.2**                              | ** ** | 35.6                                 |       | **115.4** | ** ** | 103.1 |   |

* *
| ***(millions of dollars)***                 |   | **September  30,  2002** |   | **December  31,  2001** |   |
|---------------------------------------------|--------|--------------------------|--------|-------------------------|--------|
|                                        |   |                     |   | **(audited)**           |   |
| **Northern Border Pipeline Balance  Sheet** |   |                     |   |                    |   |
| **Assets**                                  |   |                     |   |                    |   |
| Cash and cash  equivalents                  |   | **28.0**                 |   | 11.0                    |   |
| Other current  assets                       |   | **37.9**                 |   | 36.3                    |   |
| Plant, property  and equipment, net         |   | **1,649.3**              |   | 1,685.7                 |   |
| Other assets                                |   | **36.3**                 |   | 18.9                    |   |
|                                        |   | **1,751.5**              |   | 1,751.9                 |   |
| **Liabilities and Partners’ Equity**   |   |                     |   |                    |   |
| Current  liabilities                        |   | **120.4**                |   | 399.0                   |   |
| Reserves and  deferred credits              |   | **5.4**                  |   | 5.6                     |   |
| Long-term debt,  net of current maturities  |   | **801.0**                |   | 513.7                   |   |
| Partners’ equity                       |   |                     |   |                    |   |
| Partners’  capital                     |   | **817.6**                |   | 824.4                   |   |
| Accumulated  other comprehensive income     |   | **7.1**                  |   | 9.2                     |   |
|                                        |   | **1,751.5**              |   | 1,751.9                 |   |

 

19

----

 

***Third Quarter 2002Compared with Third Quarter 2001***

 

Net incomeincreased $3.6 million (10%) for the third quarter of 2002, as compared to thesame period in 2001.  Northern BorderPipeline’s operating results benefited from increased operating revenues fromProject 2000.

 

Revenues increased$3.7 million (5%) for the third quarter of 2002, as compared to the same periodin 2001, due primarily to additional revenues of approximately $3.4 millionrelated to Project 2000.

 

Costs and expensesconsist of operations and maintenance expense and taxes other than income.

 

Taxes other thanincome decreased $0.8 million (9%) for the third quarter of 2002, as comparedto the same period in 2001.  The 2001amount included adjustments to previous estimates of ad valorem taxes forincreases in property valuations.

 

Other income(expense) increased $0.3 million for the third quarter of 2002, as compared tothe same period in 2001.  The amount forthe third quarter of 2002 includes income of approximately $0.6 million forpreviously vacated microwave frequency bands.

 

***Nine Months EndedSeptember 30, 2002 Compared with Nine Months Ended September 30, 2001***

 

Net incomeincreased $12.3 million (12%) for the first nine months of 2002, as compared tothe same period in 2001.  NorthernBorder Pipeline’s operating results benefited from increased operating revenuesfrom Project 2000, reductions in interest expense due to lower interest ratesas well as reductions in operations and maintenance expenses.  The 2001 results also included a write-offfor an uncollectible receivable.

 

Revenues increased$8.0 million (3%) for the first nine months of 2002, as compared to the sameperiod in 2001, due primarily to additional revenues of approximately $10.2million related to Project 2000.  Theimpact of the additional revenues associated with Project 2000 was partiallyoffset by uncollected revenues associated with the transportation capacity heldby ENA (see “Update on the Impact of Enron’s Chapter 11 Filing on NorthernBorder Pipeline’s Business”).  For thefirst nine months of 2002, the revenues lost on this capacity totaledapproximately $1.8 million.

 

Costs and expensesconsist of operations and maintenance expense and taxes other than income.

 

Operations andmaintenance expense decreased $2.8 million (11%) for the first nine months of2002, as compared to the same period in 2001, due primarily to a decrease inemployee benefits and administrative

 

20

----

 

expenses partiallyoffset by an increase in regulatory commission expense.

 

Taxes other thanincome increased $1.5 million (8%) for the first nine months of 2002, ascompared to the same period in 2001. Northern Border Pipeline periodically reviews and adjusts its estimatesof ad valorem taxes.  Net reductions toprevious estimates in 2001 exceeded reductions to previous estimates in 2002 byapproximately $1.6 million.

 

Financial chargesdecreased $1.6 million (4%) for the first nine months of 2002, as compared tothe same period in 2001, due primarily to a decrease in Northern BorderPipeline’s average interest rate between 2001 and 2002.

 

Other income(expense) increased $2.0 million for the first nine months of 2002, as comparedto the same period in 2001.  The 2002amount includes income of approximately $0.6 million for previously vacatedmicrowave frequency bands.  The amountfor 2001 includes a charge of approximately $1.7 million for an uncollectiblereceivable from a telecommunications company that had purchased excess capacityon Northern Border Pipeline’s communication system.

 

**Liquidityand Capital Resources of Northern Border Pipeline Company**

 

***Debt and CreditFacilities***

 

Northern BorderPipeline’s debt and credit facilities outstanding at September 30, 2002,are as follows:

 
|                                           |   |               |   | **Payments  Due by  Period**              |   |
|------------------------------------------------|--------|--------------------|--------|-------------------------------------------|--------|
|                                           |   | **Total**          |   | **Current  Portion  (Less Than  1 Year)** |   | **Long-  Term  Portion** |   |
|                                           |   | **(In Thousands)** |   |
| 2002 Pipeline  Credit Agreement, average 2.45% |   | 108,000            |   | —                                    |   | 108,000 |   |
| 1992 Series D  Senior Notes, 8.57%             |   | 65,000             |   | 65,000                                    |   | — |   |
|                                           |   |               |   |                                      |   |   |   |
| 6.25% Senior  Notes due 2007                   |   | 225,000            |   | —                                    |   | 225,000 |   |
|                                           |   |               |   |                                      |   |   |   |
| 7.75% Senior  Notes due 2009                   |   | 200,000            |   | —                                    |   | 200,000 |   |
|                                           |   |               |   |                                      |   |   |   |
| 7.50% Senior  Notes due 2021                   |   | 250,000            |   | —                                    |   | 250,000 |   |
|                                           |   |               |   |                                      |   |   |   |
| Total                                          |   | 848,000            |   | 65,000                                    |   | 783,000 |   |

 

21

----

 

Northern BorderPipeline entered into a $175 million three-year credit agreement (2002 PipelineCredit Agreement) with certain financial institutions in May 2002.  The 2002 Pipeline Credit Agreement replaceda credit agreement entered into in 1997. The 2002 Pipeline Credit Agreement is to be used to refinance existingindebtedness and for general business purposes.  At September 30, 2002, $108 million was outstanding underthe 2002 Pipeline Credit Agreement at an average interest rate of 2.45%.

 

At September 30,2002, Northern Border Pipeline had outstanding $65 million of Series D SeniorNotes issued in a $250 million private placement under a July 1992 notepurchase agreement.  The Series D SeniorNotes mature in August 2003.  NorthernBorder Pipeline anticipates borrowing under the 2002 Pipeline Credit Agreementto repay the Series D Senior Notes.

 

In April 2002,Northern Border Pipeline completed a private offering of $225 million of 6.25%Senior Notes due 2007 (2002 Pipeline Senior Notes).  The indenture under which the 2002 Pipeline Senior Notes wasissued does not limit the amount of unsecured debt Northern Border Pipeline mayincur, but it does include restrictions on incurrence of secured indebtedness.  The proceeds from the 2002 Pipeline SeniorNotes of approximately $223.5 million were used to reduce indebtednessoutstanding under a previous credit agreement.

 

Short-termliquidity needs will be met by operating cash flows and the 2002 PipelineCredit Agreement.  Long-term capitalneeds may be met through the ability to issue long-term indebtedness.

 

***Cash Flows fromOperating Activities***

 

Cash flows provided by operating activities increased $24.1 million to$163.4 million for the first nine months of 2002, as compared to the sameperiod in 2001, primarily due to increases in operating revenues, decreases inoperating expenses, lower interest payments and the impact of rate case refundsin 2001.  Interest payments havedecreased $9.6 million between 2001 and 2002 due to lower average interestrates and changes in timing of interest payments.  Additionally in the first nine months of 2001, Northern BorderPipeline realized net cash outflows of approximately $4.7 million related toits rate case refunds.  During the firstquarter of 2001, Northern Border Pipeline made refunds to its shippers totaling$6.8 million, which included approximately $2.1 million collected in the firstquarter of 2001 with the remainder collected previously.

 

***Cash Flows fromInvesting Activities***

 

Capitalexpenditures were $6.7 million for the first nine months of 2002 as compared to$51.1 million for the same period in 2001. The 2002 and 2001 amounts include $0.4 million and $46.3 million,

 

22

----

 

respectively, forProject 2000.  The remaining capitalexpenditures for 2002 and 2001 were primarily related to renewals andreplacements of existing facilities.

 

Total capitalexpenditures for 2002 are estimated to be $11 million.  Northern Border Pipeline currentlyanticipates funding its 2002 capital expenditures primarily by borrowing ondebt facilities and using operating cash flows.

 

***Cash Flows fromFinancing Activities***

 

Cash flows used infinancing activities were $139.8 million for the first nine months of 2002 ascompared to $105.1 million for the same period in 2001.  Distributions to partners increased $17.5million to $122.2 million for the first nine months of 2002, as compared to thesame period in 2001.  The distribution amountpaid is determined from the quarterly operating results.  For the third quarter of 2002, NorthernBorder Pipeline declared a distribution of $41.9 million, which was paid onNovember 1, 2002.  For 2002, NorthernBorder Pipeline received net proceeds from the 2002 Pipeline Senior Notes ofapproximately $223.5 million that were used to reduce indebtedness outstandingunder a previously outstanding credit agreement.  The net proceeds from the issuance of the 7.50% Senior Notestotaled approximately $247.2 million in 2001 and were used for repayment ofamounts borrowed under a previously outstanding credit agreement.  In August 2002 and August 2001, NorthernBorder Pipeline repaid its 1992 Series C and B Senior Notes of $78 million and$41 million, respectively, primarily by borrowing under its creditagreements.  During the first ninemonths of 2002, Northern Border Pipeline had net repayments under its creditagreements of $164.0 million as compared to net repayments in 2001 of $180.0million.  In April 2002, Northern BorderPipeline received $2.4 million from the termination of forward startinginterest rate swaps.  For the first ninemonths of 2001, Northern Border Pipeline recognized a decrease in bankoverdraft of $22.4 million.  At December31, 2000, Northern Border Pipeline reflected the bank overdraft primarily dueto rate refund checks outstanding.

 

***Update on theImpact of Enron’s Chapter 11 Filing on Northern Border Pipeline’s Business***

 

On December 2, 2001, Enron filed a voluntary petition for bankruptcyprotection under Chapter 11 of the United States Bankruptcy Code.  Certain wholly owned Enron subsidiaries,including ENA, have also filed for Chapter 11 bankruptcy protection.  ENA was a party to shipper contractsobligating ENA to pay demand charges for approximately 3.4% of Northern BorderPipeline’s capacity.  On June 13, 2002,the Bankruptcy Court approved a Stipulation and Order entered into on May 15,2002, by ENA and Northern Border Pipeline pursuant to which ENA agreed that allbut one of the shipper contracts, representing 1.7% of pipeline capacity, willbe deemed

 

23

----

 

rejected and terminated.  NorthernBorder Pipeline has advised TC PipeLines that the remaining contract capacitywas terminated in the third quarter of 2002 and that it has posted theavailable capacity and contracted portions of the capacity for varyingterms.  Northern Border Pipeline hasfurther advised TC PipeLines that, at November 1, 2002, approximately 2%of its available capacity was not contracted under firm transportaionagreements.  For the nine months endedSeptember 30, 2002, Northern Border Pipeline has experienced lost revenues ofapproximately $1.8 million related to former ENA capacity, with TC PipeLines’share equating to approximately $0.5 million. Northern Border Pipeline has advised TC PipeLines that it has filedproofs of claims against ENA regarding the amount of damages for breach ofcontract and other claims in the bankruptcy proceeding.  However, Northern Border Pipeline cannotpredict the amounts, if any, that it will collect or the timing ofcollection.  Northern Border Pipelinebelieves, however, that any amounts collected will not be material.

 

TCPipeLines has been advised by Northern Border Pipeline that Northern PlainsNatural Gas Company, as operator for Northern Border Pipeline, has advised thatunder the Operating Agreement, increased costs may be incurred for health careexpenses and pension benefits.  Suchcosts are projected to increase as a result of actual medical claimsexperience, pension investment returns and effects of the Enron bankruptcyfiling.  While the determination ofreimbursement of such costs under the Operating Agreement will be made at thetime of occurrence, for its 2003 forecasts, Northern Border Pipeline hasadvised TC PipeLines that it has estimated an increase of $3 million over 2002levels.  (TC PipeLines share of thatincrease would amount to $0.9 million.) The actual amount of increased costs that Northern Border Pipelineincurs in 2003 for these items may vary depending upon actual expenses anddevelopments in Enron’s bankruptcy.

 

Northern Border Pipeline has advised TC PipeLines that on May 3, 2002,Enron presented to the creditors’ committee a proposal under which specifiedcore energy assets of Enron would be separated from Enron’s bankruptcy estateand operated prospectively as a new integrated power and pipeline company.  Northern Plains and Pan Border are proposedto be included in this company. Northern Plains and Pan Border are the majority general partners ofNorthern Border Intermediate Limited Partnership, which owns a 70% interest inNorthern Border Pipeline.  On August 27,2002, Enron announced that it had commenced a formal sales process for itsinterests in certain major assets and that it had extended invitations to visitelectronic data rooms containing information on 12 of its most valuablebusinesses, with Northern Plains and Pan Border comprising one of thosebusinesses, to potential bidders with whom Enron has executed confidentialityagreements.  The announcement alsostated that Enron and its advisors, in consultation with the creditors’committee and its advisors, will evaluate all offers received to determine thecombination of bids that maximizes the value of all assets.  Enron stated that it reserves the right notto sell any of its assets if the bids received are not deemed fully reflectiveof the assets’ value.  Northern BorderPipeline has advised TC Pipelines that Enron and its advisors have receivedinitial indications of interest in the businesses in October 2002.  Neither Northern Border Pipeline nor TCPipeLines can predict whether Northern Plains and Pan Border will be sold to abidder in the auction process or ultimately included in the new integratedpower and pipeline company under the proposal presented by Enron.

 

24

----

 

TC PipeLines plansto continue to monitor developments at Enron, to continue to assess the impacton TC PipeLines of Northern Border Pipeline’s existing agreements andrelationships with Enron, and to take appropriate action to protect theinterests of TC PipeLines and its unitholders. For risks associated with Enron’s Chapter 11 filing, please read thePartnership’s Annual Report on Form 10-K for the year ended December 31, 2001 -Item 7.  Management’s Discussion andAnalysis of  Financial Condition andResults of Operations - Impact of Enron’s Chapter 11 Filing on Northern BorderPipeline’s Bussiness - Possible Effects.”

 

**Results of Operations of TuscaroraGas Transmission Company**

 

The following sets out summarized financial information for Tuscarorafor the three and nine months ended September 30, 2002 and 2001 and as atSeptember 30, 2002 and December 31, 2001. Amounts discussed represent 100% of the operations of Tuscarora, ofwhich the Partnership has held a 49% interest since September 1, 2000.

 
|                            |   | **Three months  ended  September 30** |       | **Nine months  ended  September 30** |   |
|---------------------------------|--------|---------------------------------------|------------|--------------------------------------|--------|
| ***(millions of dollars)***     |   | **2002**                              |       | **2001**                             |   | **2002** |   | **2001** |   |
| **Tuscarora  Income Statement** |   |                                  | ** ** |                                 |   |   | ** ** |   |   |
| Revenues                        |   | **5.6**                               | ** ** | 5.3                                  |   | **16.8** | ** ** | 15.8 |   |
| Costs and  expenses             |   | **(0.6**                              | **)**      | (0.7                                 | )      | **(2.0** | **)** | (1.9 | ) |
| Depreciation                    |   | **(1.2**                              | **)**      | (1.2                                 | )      | **(3.5** | **)** | (3.5 | ) |
| Financial  charges              |   | **(1.3**                              | **)**      | (1.5                                 | )      | **(4.4** | **)** | (4.7 | ) |
| Other income                    |   | **0.2**                               | ** ** | —                               |   | **0.5** | ** ** | 0.3 |   |
| Net income                      |   | **2.7**                               | ** ** | 1.9                                  |   | **7.4** | ** ** | 6.0 |   |

 

25

----

 
| ***(millions of dollars)***                |   | **September  30,  2002** |   | **December  31,  2001** |   |
|--------------------------------------------|--------|--------------------------|--------|-------------------------|--------|
|                                       |   |                     |   | **(audited)**           |   |
| **Tuscarora Balance Sheet**                |   |                     |   |                    |   |
| **Assets**                                 |   |                     |   |                    |   |
| Cash and cash  equivalents                 |   | **1.1**                  |   | 1.1                     |   |
| Other current  assets                      |   | **2.1**                  |   | 2.1                     |   |
| Plant, property  and equipment, net        |   | **143.4**                |   | 121.3                   |   |
| Other assets                               |   | **1.2**                  |   | 1.6                     |   |
|                                       |   | **147.8**                |   | 126.1                   |   |
| **Liabilities and Partners’ Equity**  |   |                     |   |                    |   |
| Current  liabilities                       |   | **12.3**                 |   | 7.7                     |   |
| Long-term debt,  net of current maturities |   | **87.7**                 |   | 80.0                    |   |
| Partners’ equity                      |   |                     |   |                    |   |
| Partners’  capital                    |   | **47.7**                 |   | 37.9                    |   |
| Accumulated  other comprehensive income    |   | **0.1**                  |   | 0.5                     |   |
|                                       |   | **147.8**                |   | 126.1                   |   |

 

## ***ThirdQuarter 2002 Compared with Third Quarter 2001***

 

Net income increased $0.8 million, or 42%, to $2.7million for the third quarter of 2002, compared to $1.9 million for the sameperiod last year.  This increase isprimarily due to higher revenue, lower financial charges and higher otherincome.

 

Revenues earned by Tuscarora increased $0.3 million,or 6%, to $5.6 million for the third quarter of 2002, compared to $5.3 millionfor the same period last year.  Thisincrease is due to incremental revenues being generated from new transportationcontracts.

 

Costs and expenses and depreciation incurred by Tuscarora in the thirdquarter of 2002 were consistent with the same period last year.

 

Financial charges of Tuscarora decreased $0.2 million, or 13%, to $1.3million for the third quarter of 2002, compared to $1.5 million for the sameperiod last year.  This decrease is dueprimarily to the capitalization of interest expense related to funds being usedfor Tuscarora’s expansion.

 

Other income was $0.2 million in the third quarter of 2002, a $0.2million increase from the same period last year.  This increase is due to higher equity allowance for funds usedduring construction as a result of Tuscarora’s expansion.

 

## ***NineMonths Ended September 30, 2002 Compared with Nine Months Ended September 30,2001***

 

Net income increased $1.4 million, or 23%, to $7.4million for the first nine months of 2002, compared to $6.0 million for thesame period last year.  This increase isprimarily due to higher revenue, lower financial charges and higher otherincome.

 

26

----

 

Revenues earned by Tuscarora increased $1.0 million,or 6%, to $16.8 million for the first nine months of 2002, compared to $15.8million for the same period last year. This increase is due to incremental revenues being generated from newtransportation contracts.

 

Costs and expenses and depreciation incurred by Tuscarora in the firstnine months of 2002 were consistent with the same period last year.

 

27

----

 

Financial charges of Tuscarora decreased $0.3 million, or 6%, to $4.4million for the first nine months of 2002, compared to $4.7 million for thesame period last year.  This decrease isdue primarily to the capitalization of interest expense related to funds beingused for Tuscarora’s expansion.

 

Other incomeincreased $0.2 million, or 67%, to $0.5 million for the first nine months of2002, compared to $0.3 million for the same period last year.  This increase is due to higher equityallowance for funds used during construction as a result of Tuscarora’sexpansion.

 

**Liquidityand Capital Resources of Tuscarora Gas Transmission Company**

 

### ***CashFlows from Operating Activities***

 

Cash flowsprovided by operating activities increased $6.3 million to $15.6 million forthe first nine months of 2002 compared to $9.3 million last year primarily dueto increases in accounts payable relating to Tuscarora’s expansion project.

 

### ***CashFlows from Investing Activities***

 

Cash flows used in investing activities increased $20.8 million to $25.7million for the first nine months of 2002 compared to $4.9 million last yearprimarily due to Tuscarora’s expansion project.

 

### ***CashFlows from Financing Activities***

 

On January 4, 2002, Tuscarora entered into a credit agreement with athird party for a $5 million, 364-day revolving credit facility which bearsinterest at either the LIBOR rate plus 1% or the prime rate.  At September 30, 2002, Tuscarora had noamount outstanding under the revolving credit facility.

 

On March 15, 2002, Tuscarora issued Series C Senior Secured Notes in theamount of $10 million.  These notes bearinterest at 6.89% and are due in 2012. The proceeds from these notes are being used to finance a portion of thecost of the construction of Tuscarora’s expansion project.

 

For the first nine months of 2002, Tuscarora recorded cash flows fromfinancing activities of $10.1 million compared to cash flows used in financingactivities of $5.2 million last year. In the first nine months of 2002, Tuscarora received proceeds of $10million from the issuance of its Series C Secured Notes and paid $0.3 millionin related issuance costs.  Tuscaroraalso repaid $2.1 million of long-term debt in the first nine months of2002.  Tuscarora received contributionsfrom partners of $9.2 million and paid cash distributions of $6.7 million inthe first nine months of 2002.

 

28

----

 

For the first nine months of 2001, Tuscarora repaid $2.1 million oflong-term debt.  In addition, Tuscarorapaid cash distributions of $3.4 million. Tuscarora did not make a cash distribution in the first quarter of 2001due to the timing of the implementation of its cash distribution policy.

 

29

----

 

**ITEM 3.****  QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK**

 

TC PipeLines’ interest rate exposure results from its Revolving CreditFacility, which is subject to variability in LIBOR interest rates.  Since December 31, 2001, there has not beenany material change to TC PipeLines’ interest rate exposure.

 

The Partnership’smarket risk sensitivity is also influenced by and reflects the same factorsthat influence Northern Border Pipeline. Neither Northern Border Pipeline nor Tuscarora owns any of the naturalgas they transport, and, therefore, do not assume any of the related naturalgas commodity price risk.

 

Northern BorderPipeline’s interest rate exposure results from variable rate borrowings fromcommercial banks.  To mitigate potentialfluctuations in interest rates, Northern Border Pipeline attempts to maintain asignificant portion of its debt portfolio in fixed rate debt. As of September30, 2002, approximately 61% of Northern Border Pipline’s debt portfolio is infixed rate debt. If average interest rates change by one percentage pointcompared to rates in effect at September 30, 2002, annual interest expensewould change by approximately $3.3 million. This amount has been determined by considering the impact of thehypothetical interest rates on variable rate borrowings outstanding as of  September 30, 2002.

 

 

30

----

 

**ITEM 4.****  CONTROLS AND PROCEDURES**

 

**Controls and Procedures**

 

a)              *Evaluation of disclosure controls andprocedures. *Based on theirevaluation of the Partnership’s disclosure controls and procedures as of a datewithin 90 days of the filing of this quarterly report, the Chief ExecutiveOfficer and Chief Financial Officer of the general partner of the Partnershiphave concluded that the disclosure controls and procedures are effective.

 

*b)**            Changesin internal controls.*There were no significant changes in thePartnership’s internal controls or in other factors that could significantlyaffect these controls subsequent to the date of their evaluation.

 

31

----

 

**PART II.****  OTHER INFORMATION**

**ITEM 6.****  EXHIBITS AND REPORTS ON FORM 8-K**

 

(a)               Exhibits

 

10.1                     First Amendment and Waiver to CreditAgreement among TC PipeLines, LP, the Lenders Party thereto and Bank One NA asagent dated April 15, 2002.

 

10.2                     Second Amendment to Credit Agreement among TCPipeLines, LP, the Lenders Party thereto and Bank One NA as agent datedSeptember 30, 2002 .

 

99.1                     Certification of President and ChiefExecutive Officer Regarding Periodic Report Containing Financial Statements.

 

99.2                     Certification of Chief Financial OfficerRegarding Periodic Report Containing Financial Statements.

 

(b)              Reportson Form 8-K

 

1.                                 Reporton Form 8-K dated and filed on August 16, 2002 reporting that TransCanadaPipeLines Limited, parent of the general partner of TC PipeLines, LP, acquired100% of the outstanding common stock of Northwest Border Pipeline Company fromThe Williams Companies, Inc.  NorthwestBorder holds a 0.35% general partner interest in Northern Border Partners,L.P., the owner of a 70% general partner interest in Northern Border PipelineCompany.

 

32

----

 

### **SIGNATURES**

 

Pursuant to therequirements of the Securities and Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

 
|   | **TC  PipeLines, LP**            |                                              |
|--------|----------------------------------|---------------------------------------------------|
|   | (a Delaware Limited Partnership) |                                              |
|   |                             |
|   | By:                              | TC PipeLines GP, Inc., its general partner        |   |
|   |                             |                                              |   |
|   | By:                              | /s/  Russell  K. Girling                     |   |   |
| Date:  | November 14, 2002                |                                              | Russell K. Girling |   |
|   |                             | Chief Financial Officer (duly authorized officer) |   |
|   |                             |                                              |   |
|   | By:                              | /s/  Theresa  Jang                           |   |   |
| Date:  | November 14, 2002                |                                              | Theresa Jang |   |
|   |                             | Controller (duly authorized officer)              |   |

 

33

----

 

**CERTIFICATIONS**

 

I, Ronald J.Turner, certify that:

 

1.               I have reviewedthis quarterly report on Form 10-Q of TC PipeLines, LP;

 

2.               Based on myknowledge, this quarterly report does not contain any untrue statements of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report;

 

3.               Based on myknowledge, the financial statements, and other financial information includedin this quarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

 

4.               The registrant’sother certifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

a)              designed suchdisclosure controls and procedures to ensure that material information relatingto the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisquarterly report is being prepared;

 

b)             evaluated theeffectiveness of the registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)              presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.               The registrant’sother certifying officers and I have disclosed, based on our most recentevaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

 

a)              all significant deficienciesin the design or operation of internal controls which could adversely affectthe registrant’s ability to record, process, summarize and report financialdata and have identified for the registrant’s auditors any material weaknessesin internal controls; and

 

34

----

 

b)             any fraud, whether ornot material, that involves management or other employees who have asignificant role in the registrant’s internal controls; and

 

6.               The registrant’sother certifying officers and I have indicated in this quarterly report whetheror not there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

 
| Dated: | November 14th, 2002 |                                      |   |
|--------|---------------------|-------------------------------------------|--------|
|   |                |                                      |
|   |                |                                      |
|   |                | /s/ Ronald J. Turner                      |   |
|   |                | Ronald J. Turner                          |
|   |                | President and Chief Executive Officer     |
|   |                | TC PipeLines GP, Inc., as general partner |

 

35

----

 

I, Russell K.Girling, certify that:

 

1.               I have reviewedthis quarterly report on Form 10-Q of TC PipeLines, LP;

 

2.               Based on myknowledge, this quarterly report does not contain any untrue statements of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this quarterly report;

 

3.               Based on my knowledge,the financial statements, and other financial information included in thisquarterly report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, andfor, the periods presented in this quarterly report;

 

4.               The registrant’sother certifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and we have:

 

a)              designed suchdisclosure controls and procedures to ensure that material information relatingto the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisquarterly report is being prepared;

 

b)             evaluated theeffectiveness of the registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)              presented in thisquarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.               The registrant’sother certifying officers and I have disclosed, based on our most recentevaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunction):

 

a)              all significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant’s ability to record, process, summarize andreport financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

36

----

 

b)             any fraud, whether ornot material, that involves management or other employees who have asignificant role in the registrant’s internal controls; and

 

6.               The registrant’sother certifying officers and I have indicated in this quarterly report whetheror not there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date of ourmost recent evaluation, including any corrective actions with regard tosignificant deficiencies and material weaknesses.

 
| Dated: | November 14th, 2002 |                                      |   |
|--------|---------------------|-------------------------------------------|--------|
|   |                |                                      |
|   |                |                                      |
|   |                | /s/ Russell K. Girling                    |   |
|   |                | Russell K. Girling                        |
|   |                | Chief Financial Officer                   |
|   |                | TC PipeLines GP, Inc., as general partner |

 

37

----

 

# **EXHIBIT INDEX**

 

 
| **Exhibit No.** |   | **Description**                                                                                                                                   |
|-----------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|            |   |                                                                                                                                              |
| 10.1            |   | First Amendment and Waiver  to Credit Agreement among TC PipeLines, LP, the Lenders Party thereto and  Bank One NA as agent dated April 15, 2002. |
|            |   |                                                                                                                                              |
| 10.2            |   | Second Amendment to Credit  Agreement among TC PipeLines, LP, the Lenders Party thereto and Bank One NA as  agent dated September 30, 2002.       |
|            |   |                                                                                                                                              |
| 99.1            |   | Certification of President  and Chief Executive Officer Regarding Periodic Report Containing Financial  Statements.                               |
|            |   |                                                                                                                                              |
| 99.2            |   | Certification of Chief  Financial Officer Regarding Periodic Report Containing Financial Statements.                                              |

 

38

----