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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

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:  001-35358

TC PipeLines, LP

(Exact name of registrant as specified in its charter)

877-290-2772

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x                    No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x                    No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨                    No x

As of October 24, 2014, there were 63,561,546 of the registrant’s common units outstanding.

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All amounts are stated in United States dollars unless otherwise indicated.

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DEFINITIONS

The abbreviations, acronyms, and industry terminology used in this quarterly report are defined as follows:

Unless the context clearly indicates otherwise, TC PipeLines, LP and its subsidiaries are collectively referred to in this quarterly report as “we,” “us,” “our” and “the Partnership.” We use “our pipeline systems” and “our pipelines” when referring to the Partnership’s ownership interests in Gas Transmission Northwest LLC (GTN), Northern Border Pipeline Company (Northern Border), Bison Pipeline LLC (Bison), Great Lakes Gas Transmission Limited Partnership (Great Lakes), North Baja Pipeline, LLC (North Baja) and Tuscarora Gas Transmission Company (Tuscarora).

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PART I

FORWARD-LOOKING STATEMENTS AND CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This report includes certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are identified by words and phrases such as: “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “forecast,” “should,” “predict,” “could,” “will,” “may,” and other terms and expressions of similar meaning. The absence of these words, however, does not mean that the statements are not forward-looking. These statements are based on management’s beliefs and assumptions and on currently available information and include, but are not limited to, statements regarding anticipated financial performance, future capital expenditures, liquidity, market or competitive conditions, regulations, organic or strategic growth opportunities, contract renewals and ability to market open capacity, business prospects, outcome of regulatory proceedings and cash distributions to unitholders.

Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the results predicted. Factors that could cause actual results and our financial condition to differ materially from those contemplated in forward-looking statements include, but are not limited to:

·                                the ability of our pipeline systems to sell available capacity on favorable terms and renew expiring contracts which are affected by, among other factors:

o                 demand for natural gas;

o                 changes in relative cost structures and production levels of natural gas producing basins;

o                 natural gas prices and regional differences;

o                 weather conditions;

o                 availability and location of natural gas supplies in Canada and the U.S. in relation to our pipeline systems;

o                 competition from other pipeline systems;

o                 natural gas storage levels; and

o                 rates and terms of service;

·                                the performance by the shippers of their contractual obligations on our pipeline systems;

·                                the outcome and frequency of rate proceedings or settlement negotiations on our pipeline systems;

·                                changes in the taxation of master limited partnership investments by state or federal governments such as the elimination of pass-through taxation or tax deferred distributions;

·                                increases in operational or compliance costs resulting from changes in laws and governmental regulations affecting our pipeline systems, particularly regulations issued by the Federal Energy Regulatory Commission (FERC), the U.S. Environmental Protection Agency (EPA) and U.S. Department of Transportation (DOT);

·                                our ongoing ability to grow distributions through acquisitions, accretive expansions or other growth opportunities, including the timing of further potential acquisitions from TransCanada;

·                                potential conflicts of interest between TC PipeLines GP, Inc., our general partner (General Partner), TransCanada and us;

·                                the ability to maintain secure operation of our information technology;

·                                the impact of any impairment charges;

·                                operating hazards, casualty losses and other matters beyond our control; and

·                                the level of our indebtedness, including the indebtedness of our pipeline systems, and the availability of capital.

These are not the only factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statement. Other factors described elsewhere in this document, or factors that are unknown or unpredictable, could also have material adverse effects on future results. These and other risks are described in greater detail in Part I, Item 1A. “Risk Factors” in our Form 10-K for the year ended December 31, 2013. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. All forward-looking statements are made only as of the date made and except as required by applicable law, we undertake no obligation to update any forward-looking statements to reflect new information, subsequent events or other changes.

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PART I – FINANCIAL INFORMATION

Item 1.           Financial Statements

TC PIPELINES, LP

CONSOLIDATED STATEMENT OF INCOME

(a)       Recast as discussed in Note 2.

(b)       Recast as discussed in Note 7.

The accompanying notes are an integral part of these consolidated financial statements.

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TC PIPELINES, LP

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(a)       Recast as discussed in Note 2.

The accompanying notes are an integral part of these consolidated financial statements.

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TC PIPELINES, LP

CONSOLIDATED BALANCE SHEET

The accompanying notes are an integral part of these consolidated financial statements.

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TC PIPELINES, LP

CONSOLIDATED STATEMENT OF CASH FLOWS

(a)       Recast as discussed in Note 2.

The accompanying notes are an integral part of these consolidated financial statements.

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TC PIPELINES, LP

CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS’ EQUITY

(a)       Losses related to cash flow hedges reported in Accumulated Other Comprehensive Loss and expected to be reclassified to Net Income in the next 12 months are estimated to be $1 million. These estimates assume constant interest rates over time; however, the amounts reclassified will vary based on actual interest rates at the date of settlement.

The accompanying notes are an integral part of these consolidated financial statements.

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TC PIPELINES, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1        ORGANIZATION

TC PipeLines, LP and its subsidiaries are collectively referred to herein as the Partnership. The Partnership was formed by TransCanada PipeLines Limited, a wholly-owned subsidiary of TransCanada Corporation (TransCanada Corporation together with its subsidiaries collectively referred to herein as TransCanada), to acquire, own and participate in the management of energy infrastructure assets in North America.

NOTE 2        SIGNIFICANT ACCOUNTING POLICIES

The accompanying financial statements and related notes have been prepared in accordance with United States generally accepted accounting principles (GAAP) and amounts are stated in U.S. dollars. The results of operations for the three and nine months ended September 30, 2014 and 2013 are not necessarily indicative of the results that may be expected for a full fiscal year. The accompanying financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013. That report contains a more comprehensive summary of the Partnership’s major accounting policies. In the opinion of management, the accompanying financial statements contain all of the appropriate adjustments, all of which are normally recurring adjustments unless otherwise noted, considered necessary to present fairly the financial position of the Partnership, the results of operation and cash flows for the respective periods. Our significant accounting policies are consistent with those disclosed in Note 2 of the financial statements in our Annual Report on Form 10-K for the year ended December 31, 2013. Certain items from that Note are repeated or updated below as necessary to assist in understanding the accompanying financial statements.

(a) Basis of Presentation

Entities acquired from TransCanada and its affiliates are accounted for as transactions between entities under common control, similar to pooling of interests, whereby the assets and liabilities of entities acquired are recorded at TransCanada’s carrying value and any excess purchase price paid are recorded as a reduction in Partners’ Equity. To the extent that such transactions require the Partnership’s historical financial information to be recast, we will present the transaction as if it had occurred at the beginning of the earliest period presented and any historical net equity amounts prior to the transaction date are reflected in the account of TransCanada as the former parent. However, in calculating the Net income per common unit, net income or loss of the entities acquired prior to the transaction will be reflected in the account of TransCanada. Therefore, any historical net income per common unit amounts will not be recast.

The Partnership consolidates its investments in GTN, Bison, North Baja and Tuscarora, over which it is able to exercise control. To the extent there are interests owned by other parties, these interests are included in non-controlling interests. The Partnership uses the equity method of accounting for its investments in Northern Border and Great Lakes, over which it is able to exercise significant influence.

On July 1, 2013, the Partnership acquired an additional 45 percent membership interest in each of GTN and Bison (the 2013 Acquisition) from subsidiaries of TransCanada which resulted in a 70 percent ownership in each of GTN and Bison. Partnership’s historical financial information, except net income attributable to controlling interest allocation and net income per common unit amounts, was recast to consolidate GTN and Bison for all periods presented.  See also Note 7.

(b) Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Although management believes these estimates are reasonable, actual results could differ from these estimates.

NOTE 3        ACCOUNTING PRONOUNCEMENTS

Future Accounting Changes

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Revenue from contracts with customers

In May 2014, the FASB issued new guidance on Revenue from Contracts with Customers (Topic 606). This guidance supersedes the revenue recognition requirements in Topic 605, Revenue Recognition and most industry-specific guidance. This new guidance requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This new guidance is effective from January 1, 2017 with two methods in which the amendment can be applied; (1) retrospectively to each prior reporting period presented, or (2) retrospectively with the cumulative effect recognized at the date of initial application.   Early application is not permitted. The Partnership is currently evaluating the impact of the adoption of this Accounting Standards Update (ASU) and has not yet determined the effect on its consolidated financial statements.

NOTE 4        INVESTMENTS IN UNCONSOLIDATED AFFILIATES

Northern Border and Great Lakes are regulated by FERC and are operated by TransCanada. The Partnership uses the equity method of accounting for its interests in its equity investees.

(a)       Equity earnings from Northern Border is net of the 12-year amortization of a $10 million transaction fee paid to the operator of Northern Border at the time of the Partnership’s additional 20 percent interest acquisition in April 2006.

Northern Border

The Partnership recorded no undistributed earnings from Northern Border for the nine months ended September 30, 2014 and 2013.

The summarized financial information for Northern Border is as follows:

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Great Lakes

The Partnership made an equity contribution to Great Lakes of $4 million in the first quarter of 2014. This amount represents the Partnership’s 46.45 percent share of a $9 million cash call from Great Lakes to make a scheduled debt repayment.

The Partnership recorded no undistributed earnings from Great Lakes for the nine months ended September 30, 2014 and 2013.

The summarized financial information for Great Lakes is as follows:

NOTE 5        CREDIT FACILITIES AND LONG-TERM DEBT

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The Partnership’s Senior Credit Facility consists of a $500 million senior revolving credit facility with a banking syndicate, maturing November 20, 2017, under which $335 million was outstanding at September 30, 2014 (December 31, 2013 - $380 million), leaving $165 million available for future borrowing.

The London Interbank Offered Rate (LIBOR) based interest rate on the Senior Credit Facility averaged 1.41 percent for the three and nine months ended September 30, 2014 (2013 – 1.44 and 1.45 percent). The LIBOR-based interest rate was 1.41 percent at September 30, 2014 (December 31, 2013 – 1.42 percent).

On July 1, 2013, the Partnership entered into a term loan agreement with a syndicate of lenders for a $500 million term loan credit facility (Term Loan Facility). On July 2, 2013, the Partnership borrowed $500 million under the Term Loan Facility.

The LIBOR-based interest rate on the Term Loan Facility averaged 1.41 percent for the three months ended September 30, 2014 (2013 – 1.44 percent).  For the nine months ended September 30, 2014, the interest averaged 1.41 percent. After hedging activity, the interest rate incurred on the Term Loan Facility averaged 1.83 percent for three months ended September 30, 2014 (2013 – 1.56 percent).  For the nine months ended September 30, 2014, the interest rate averaged 1.83 percent. Prior to hedging activities, the LIBOR-based interest rate was 1.41 percent at September 30, 2014 (December 31, 2013 – 1.42 percent).

The Partnership’s Senior Credit Facility and Term Loan Facility contain a covenant requiring us to maintain a maximum agreed upon leverage ratio.

GTN’s Senior Notes provisions contain a covenant that limits total debt to no greater than 70 percent of total capitalization.

The Series D Senior Notes, which require yearly principal payments until its maturity, are secured by Tuscarora’s transportation contracts, supporting agreements and substantially all of Tuscarora’s property. The note purchase agreements contain certain provisions that include, among other items, limitations on additional indebtedness and distributions to partners.

As of September 30, 2014, the Partnership was in compliance with its financial covenants, in addition to the other covenants which include restrictions on entering into mergers, consolidations and sales of assets, granting liens, material amendments to the Second Amended and Restated Agreement of Limited Partnership (Partnership Agreement), incurring additional debt and distributions to unitholders.

The principal repayments required on the long-term debt are as follows:

NOTE 6        PARTNERS’ EQUITY

ATM equity issuance program (ATM program)

In August 2014, the Partnership entered into an Equity Distribution Agreement (the EDA) with five different financial institutions (Managers). Pursuant to the terms of the EDA, we may from time to time, through the Managers as our sales agents, offer and sell common units having an aggregate offering price of up to $200 million.  Sales of such common units will be made by means of ordinary brokers’ transactions on the NYSE at market prices, in block transactions or as otherwise agreed upon by one or more of the Managers and us. We intend to use the net proceeds from sales under the program for general partnership purposes, which may include debt repayment and future acquisitions.

Beginning in August until September 30, 2014, the Partnership issued 1.3 million common units under the ATM program generating net proceeds of approximately $73 million, including our General Partner’s proportionate equity contribution of approximately $1 million to maintain its two percent effective interest, net of approximately $1 million of commission to our sales agents.

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NOTE 7                         NET INCOME PER COMMON UNIT

Net income per common unit is computed by dividing net income attributable to controlling interests, after deduction of the General Partner’s allocation and net income attributed to GTN’s and Bison’s former parent, by the weighted average number of common units outstanding. The General Partner’s allocation is equal to an amount based upon the General Partner’s effective two percent general partner interest, plus an amount equal to incentive distributions. Incentive distributions are paid to the General Partner if quarterly cash distributions on the common units exceed levels specified in the Partnership Agreement.

Net income per common unit was determined as follows: