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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from  to
.
 Commission File Number: 333-88577
 NORTHERN BORDER PIPELINE COMPANY
  Texas
(State or other jurisdiction of 
incorporation or organization)
    
    74-2684967
(I.R.S. Employer
Identification No.)
 13710 FNB Parkway 
Omaha, Nebraska
(Address of principal executive offices)
    
    68154-5200
(Zip code)
 (402) 492-7300
 þ o
  o o þ
 o þ




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##### 



NORTHERN BORDER PIPELINE COMPANY
Quarterly Report on Form 10-Q
 TABLE OF CONTENTS
 Page No.PART I  FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsStatements of Income  Three and Six Months Ended June 30, 2007, and 2006
    
    
    4Statements of Comprehensive Income  Three and Six Months Ended
June 30, 2007, and 2006
    
    
    4Balance Sheets June 30, 2007, and December 31, 2006
    
    
    5Statements of Cash Flows  Six Months Ended June 30, 2007, and 2006
    
    
    6Statement of Changes in Partners Equity  Six Months Ended June 30, 2007
    
    
    7Notes to Financial Statements
    
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of OperationsExecutive Summary
    
    
    11Results of Operations
    
    
    11Liquidity and Capital Resources
    
    
    14Critical Accounting Policies and Estimates
    
    
    15Recent Accounting Pronouncements
    
    
    16Forward-Looking Statements
    
    
    16Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    17Item 4T.
    
    Controls and Procedures
    
    
    17PART II  OTHER INFORMATIONItem 1A.
    
    Risk Factors
    
    
    18Item 6.
    
    Exhibits
    
    
    18Rule 13a-14(a)/15d-14(a) Certification of Principal Executive OfficerRule 13a-14(a)/15d-14(a) Certification of Principal Financial OfficerSection 1350 Certification of Principal Executive OfficerSection 1350 Certification of Principal Financial Officer
  The statements in this quarterly report that are not historical information, including statements
concerning plans and objectives of management for future operations, economic performance or
related assumptions, are forward-looking statements. Forward-looking statements may include words
such as anticipate, estimate, expect, project, intend, plan, believe, should and
other words and terms of similar meaning. Although we believe that our expectations regarding
future events are based on reasonable assumptions, we can give no assurance that our goals will be
achieved. Important factors that could cause actual results to differ materially from those in the
forward-looking statements are described under Part II, Item 1A, Risk Factors, in our quarterly
reports on Form 10-Q, including this report, and under Part I, Item 1A, Risk Factors, in our
annual report on Form 10-K for the year ended December 31, 2006.
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Glossary
  Bcf/d
    
    Billion cubic feet per dayDesign capacity
    
    Pipeline capacity available to transport natural gas based on system facilities and designconditionsDth
    
    DekathermExchange Act
    
    Securities Exchange Act of 1934, as amendedFASB
    
    Financial Accounting Standards BoardFERC
    
    Federal Energy Regulatory CommissionGAAP
    
    U.S. generally accepted accounting principlesMMcf/d
    
    Million cubic feet per dayONEOK
    
    ONEOK, Inc.ONEOK Partners
    
    ONEOK Partners, L.P. and ONEOK Partners Intermediate Limited PartnershipONEOK Partners GP
    
    ONEOK Partners GP, L.L.C., a ONEOK subsidiarySAB
    
    SEC Staff Accounting BulletinSEC
    
    Securities and Exchange CommissionSFAS
    
    Statement of Financial Accounting StandardsTC PipeLines
    
    TC PipeLines, LP and TC PipeLines Intermediate Limited PartnershipTransCanada
    
    TransCanada CorporationTransCanada Northern Border
    
    TransCanada Northern Border Inc. (formerly known as TransCan Northwest Border Ltd.), asubsidiary of TransCanada and our operator effective April 1, 2007
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PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 NORTHERN BORDER PIPELINE COMPANY
STATEMENTS OF INCOME  (Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(In thousands)Operating revenue:Operating revenue
    
    $
    68,762
    
    
    $
    73,767
    
    
    $
    148,375
    
    
    $
    153,594Provision for rate refunds
    
    
    
    
    
    
    (2,326
    )
    
    
    
    
    
    
    (2,326
    )Operating revenue, net
    
    
    68,762
    
    
    
    71,441
    
    
    
    148,375
    
    
    
    151,268Operating expenses:Operations and maintenance
    
    
    14,351
    
    
    
    12,653
    
    
    
    24,799
    
    
    
    22,111Depreciation and amortization
    
    
    15,186
    
    
    
    14,831
    
    
    
    30,463
    
    
    
    29,397Taxes other than income
    
    
    7,871
    
    
    
    7,961
    
    
    
    15,292
    
    
    
    16,067Operating expenses
    
    
    37,408
    
    
    
    35,445
    
    
    
    70,554
    
    
    
    67,575Operating income
    
    
    31,354
    
    
    
    35,996
    
    
    
    77,821
    
    
    
    83,693Interest expense
    
    
    10,861
    
    
    
    10,900
    
    
    
    21,649
    
    
    
    21,589Other income (expense):Other income
    
    
    626
    
    
    
    418
    
    
    
    1,157
    
    
    
    854Other expense
    
    
    (96
    )
    
    
    (108
    )
    
    
    (227
    )
    
    
    (200
    )Other income, net
    
    
    530
    
    
    
    310
    
    
    
    930
    
    
    
    654Net income to partners
    
    $
    21,023
    
    
    $
    25,406
    
    
    $
    57,102
    
    
    $
    62,758
 
 NORTHERN BORDER PIPELINE COMPANY  STATEMENTS OF COMPREHENSIVE INCOME  (Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(In thousands)Net income to partners
    
    $
    21,023
    
    
    $
    25,406
    
    
    $
    57,102
    
    
    $
    62,758Other comprehensive income:Changes associated with hedging
transactions
    
    
    (384
    )
    
    
    (394
    )
    
    
    (855
    )
    
    
    (782
    )Total comprehensive income
    
    $
    20,639
    
    
    $
    25,012
    
    
    $
    56,247
    
    
    $
    61,976
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NORTHERN BOREDR PIPELINE COMPANY  BALANCE SHEETS  (Unaudited)
 June 30,
    
    
    December 31,2007
    
    
    2006(In thousands)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    6,504
    
    
    $
    10,997Accounts receivable
    
    
    26,131
    
    
    
    30,428Materials and supplies, at cost
    
    
    4,114
    
    
    
    3,970Prepaid expenses and other
    
    
    641
    
    
    
    1,118Total current assets
    
    
    37,390
    
    
    
    46,513Property, plant and equipment:Natural gas transmission plant
    
    
    2,497,477
    
    
    
    2,491,287Less: Accumulated provision for depreciation
and amortization
    
    
    1,043,706
    
    
    
    1,015,646Property, plant and equipment, net
    
    
    1,453,771
    
    
    
    1,475,641Other assets:Regulatory assets
    
    
    20,398
    
    
    
    19,144Unamortized debt expense
    
    
    2,829
    
    
    
    3,284Other
    
    
    171
    
    
    
    109Total other assets
    
    
    23,398
    
    
    
    22,537Total assets
    
    $
    1,514,559
    
    
    $
    1,544,691LIABILITIES AND PARTNERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    
    
    
    $
    150,000Notes payable
    
    
    
    
    
    
    20,000Accounts payable
    
    
    12,738
    
    
    
    7,116Accrued taxes other than income
    
    
    23,990
    
    
    
    27,571Accrued interest
    
    
    11,407
    
    
    
    11,515Other
    
    
    459
    
    
    
    1,511Total current liabilities
    
    
    48,594
    
    
    
    217,713Long-term debt, net of current maturities
    
    
    609,216
    
    
    
    449,844Deferred credits and other
    
    
    5,922
    
    
    
    2,099Commitments and contingencies (Note 5)Partners equity:Partners capital
    
    
    850,704
    
    
    
    874,057Accumulated other comprehensive income
    
    
    123
    
    
    
    978Total partners equity
    
    
    850,827
    
    
    
    875,035Total liabilities and partners equity
    
    $
    1,514,559
    
    
    $
    1,544,691
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NORTHERN BORDER PIPELINE COMPANY  STATEMENT OF CASH FLOW  (Unaudited)
 Six Months EndedJune 30,2007
    
    
    2006(In thousands)CASH FLOW FROM OPERATING ACTIVITIESNet income to partners
    
    $
    57,102
    
    
    $
    62,758Adjustments to reconcile net income to partners to
net cash provided by operating activities:Depreciation and amortization
    
    
    30,654
    
    
    
    29,580Provision for rate refunds
    
    
    
    
    
    
    2,329Changes in components of working capital
    
    
    5,511
    
    
    
    1,851Other
    
    
    168
    
    
    
    (2,375
    )Total adjustments
    
    
    36,333
    
    
    
    31,385Net cash provided by operating activities
    
    
    93,435
    
    
    
    94,143CASH FLOW FROM INVESTING ACTIVITIESCapital expenditures for property, plant and equipment
    
    
    (7,216
    )
    
    
    (16,848
    )Net cash used in investing activities
    
    
    (7,216
    )
    
    
    (16,848
    )CASH FLOW FROM FINANCING ACTIVITIESEquity contributions from partners
    
    
    15,000
    
    
    
    10,330Distributions to partners
    
    
    (95,455
    )
    
    
    (93,613
    )Issuance of debt
    
    
    202,000
    
    
    
    59,000Retirement of debt
    
    
    (212,000
    )
    
    
    (67,000
    )Debt financing costs
    
    
    (257
    )
    
    
    Net cash used in financing activities
    
    
    (90,712
    )
    
    
    (91,283
    )Net change in cash and cash equivalents
    
    
    (4,493
    )
    
    
    (13,988
    )Cash and cash equivalents at beginning of period
    
    
    10,997
    
    
    
    22,039Cash and cash equivalents at end of period
    
    $
    6,504
    
    
    $
    8,051Supplemental disclosures for cash flow information:Cash paid for interest, net of amount capitalized
    
    $
    22,526
    
    
    $
    22,504Changes in components of working capital:Accounts receivable
    
    $
    4,297
    
    
    $
    10,446Materials and supplies
    
    
    (144
    )
    
    
    (314
    )Prepaid expenses and other
    
    
    477
    
    
    
    970Accounts payable and other current liabilities
    
    
    4,570
    
    
    
    (5,642
    )Accrued taxes other than income
    
    
    (3,581
    )
    
    
    (3,516
    )Accrued interest
    
    
    (108
    )
    
    
    (93
    )Total
    
    $
    5,511
    
    
    $
    1,851
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NORTHERN BORDER PIPELINE COMPANY
STATEMENTS OF CHANGES IN PARTNERS EQUITY  (Unaudited)
 ONEOKTC PipeLines
    
    
    Partners
    
    
    AccumulatedIntermediate
    
    
    Intermediate
    
    
    OtherLimited
    
    
    Limited
    
    
    Comprehensive
    
    
    Total PartnersPartnership
    
    
    Partnership
    
    
    Income
    
    
    Equity(In thousands)Partners equity at December 31, 2006
    
    $
    437,029
    
    
    $
    437,028
    
    
    $
    978
    
    
    $
    875,035Net income to partners
    
    
    28,551
    
    
    
    28,551
    
    
    
    
    
    
    
    57,102Changes associated with hedging
transactions
    
    
    
    
    
    
    
    
    
    
    (855
    )
    
    
    (855
    )Equity contributions received
    
    
    7,500
    
    
    
    7,500
    
    
    
    
    
    
    
    15,000Distributions paid
    
    
    (47,728
    )
    
    
    (47,727
    )
    
    
    
    
    
    
    (95,455
    )Partners equity at June 30, 2007
    
    $
    425,352
    
    
    $
    425,352
    
    
    $
    123
    
    
    $
    850,827
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NORTHERN BORDER PIPELINE COMPANY
NOTES TO FINANCIAL STATEMENTS
 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
    Property, Plant and Equipment and Related Depreciation and Amortization
   2. CREDIT FACILITIES AND LONG-TERM DEBT
   8




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3. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
    4. RATES AND REGULATORY ISSUES
    9




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5. COMMITMENTS AND CONTINGENCIES
  6. ACCOUNTING PRONOUNCEMENTS
   7. SUBSEQUENT EVENTS
  10




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   
 EXECUTIVE SUMMARY
 Overview 
 Recent Developments 
 Rate Case 
 Change in Operator 
 Change in Officers
  Amended and Restated Credit Facility
 
 RESULTS OF OPERATIONS
 Overview 
 Known Trends and Uncertainties
 Supply 
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Competition
 Effect of Rate Case
 Regulatory Developments
 Rate Case -
  Income Tax Allowance
 12




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Transition Related Costs
  Operating Results
    
    
    decreased revenue of $3.6 million primarily related to the reduction of long-term rates
and the implementation of varying seasonal rates effective January 1, 2007; offset by
    
    additional revenue of $0.5 million due to contracts related to the Chicago III Expansion Project; and
    
    increased revenue of $0.4 million related to increased demand for other transportation services.
  
    
    decreased revenue of $6.2 million primarily related to the reduction of long-term rates
effective January 1, 2007 and an increase in volumes sold at a discount; offset by
    
    additional revenue of $2.0 million due to contracts related to the Chicago III Expansion Project; and
    
    increased revenue of $1.3 million related to increased demand for other transportation services.
   
    
    a transition related charge during the second quarter of 2007 of $2.3 million related
to the reimbursement for shared equipment and furnishings acquired by ONEOK Partners and
previously used to support our operations;
    
    increased electric compression charges of $0.7 million primarily related to the Chicago
III Expansion Project; offset by
    
    decreased expense of $0.6 million related to the net under recovery of the compressor
usage surcharge; and
    
    decreased expense of $0.4 million related to expenses incurred during the second
quarter of 2006 for our 2005 rate case.
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
    
    a transition related charge during the second quarter of 2007 of $2.3 million related
to the reimbursement for shared equipment and furnishings acquired by ONEOK Partners and
previously used to support our operations;
    
    increased electric compression charges of $1.1 million primarily related to the Chicago
III Expansion Project; offset by
    
    decreased expense of $0.3 million related to the net under recovery of the compressor
usage surcharge; and
    
    decreased expense of $0.4 million related to expenses incurred during the second
quarter of 2006 for our 2005 rate case.
  
 LIQUIDITY AND CAPITAL RESOURCES
 Overview 
 Debt and Credit Facilities 
 Payments Due by PeriodLess Than One
    
    
    Long-TermTotal
    
    
    Year
    
    
    Portion(In thousands)$250 million credit agreement(a)
    
    $
    160,000
    
    
    
    
    
    
    $
    160,0007.75% senior notes due 2009
    
    
    200,000
    
    
    
    
    
    
    
    200,0007.50% senior notes due 2021
    
    
    250,000
    
    
    
    
    
    
    
    250,000Total
    
    $
    610,000
    
    
    $
    
    
    
    $
    610,000
 
 (a)
    
    We are required to pay a facility fee of 0.05% on the principal commitment amount of our credit agreement. Amended and Restated Credit Agreement
   14




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Cash Flow Analysis
 Operating Activities 
 Investing Activities 
 Financing Activities
     
 CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  15




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RECENT ACCOUNTING PRONOUNCEMENTS
   
 FORWARD-LOOKING STATEMENTS
  
    
    the impact of unsold capacity being greater or less than expected;
    
    the ability to market pipeline capacity on favorable terms, which is affected by:
 
    
    future demand for and prices of natural gas;
    
    competitive conditions in the overall natural gas and electricity markets;
    
    availability of supplies of Canadian and U.S. natural gas;
    
    availability of additional storage capacity;
    
    weather conditions; and
    
    competitive developments by Canadian and U.S. natural gas transmission companies;
 
    
    performance of contractual obligations by our customers;
    
    the ability to recover operating costs, costs of property, plant and equipment and
regulatory assets in our FERC-regulated rates;
    
    our ability to control operating costs;
    
    conditions in the capital markets and our ability to access the capital markets;
    
    risks inherent in the use of information systems in our business, implementation of new
software and hardware, and the impact on the timeliness of information for financial
reporting; and
    
    acts of nature, sabotage, terrorism or other similar acts causing damage to our
facilities or our suppliers or shippers facilities.
 .
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ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Overview 
  Interest Rate Risk 
  
 ITEM 4T.
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures 
 Changes in Internal Control Over Financial Reporting
  17




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PART II  OTHER INFORMATION
 
 ITEM 1A.
    
    RISK FACTORS
  Tax Risks
 If we were to become subject to a material amount of entity level taxation for state tax purposes,
then our cash available for distribution to our partners and for other business needs would be
reduced.
  
 ITEM 6.
    
    EXHIBITS
 Exhibit No.
    
    Description of Exhibit10.1
    
    Revolving Credit Agreement, dated as of April 27, 2007, among Northern Border Pipeline
Company, the lenders from time to time party thereto, SunTrust Bank, as Administrative Agent,
Wachovia Bank National Association, as Syndication Agent, BMO Capital Markets, Citibank, N.A.
and Mizuho Corporate Bank, LTD., as Co-Documentation Agents, JPMorgan Chase Bank, N.A. and
Export Development Canada, as Managing Agents and Wachovia Capital Markets, LLC and SunTrust
Capital Markets, Inc., as Co-Lead Arrangers and Book Managers (incorporated by reference to
Exhibit 10.1 to Northern Border Pipeline Companys Form 10-Q filed April 30, 2007 (File No.
333-88577)).31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.32.1
    
    Section 1350 Certification of Principal Executive Officer.32.2
    
    Section 1350 Certification of Principal Financial Officer.
 
 
    
    Filed herewith 18




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SIGNATURES
  NORTHERN BORDER PIPELINE COMPANY
(A Texas General Partnership)By:
    TransCanada Northern Border Inc., OperatorDate:   August 3, 2007
    By:
    /s/ Patricia M. WiederholtPatricia M. WiederholtPrincipal Financial Officer and Controller 19




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EXHIBIT INDEX
 Exhibit No.
    
    Description10.1
    
    Revolving Credit Agreement, dated as of April 27, 2007, among
Northern Border Pipeline Company, the lenders from time to time party
thereto, SunTrust Bank, as Administrative Agent, Wachovia Bank
National Association, as Syndication Agent, BMO Capital Markets,
Citibank, N.A. and Mizuho Corporate Bank, LTD., as Co-Documentation
Agents, JPMorgan Chase Bank, N.A. and Export Development Canada, as
Managing Agents and Wachovia Capital Markets, LLC and SunTrust
Capital Markets, Inc., as Co-Lead Arrangers and Book Managers
(incorporated by reference to Exhibit 10.1 to Northern Border
Pipeline Companys Form 10-Q filed April 30, 2007 (File No.
333-88577)).31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.32.1
    
    Section 1350 Certification of Principal Executive Officer.32.2
    
    Section 1350 Certification of Principal Financial Officer.
 
 
    
    Filed herewith