| RELATED PARTY TRANSACTIONS | 24. RELATED PARTY TRANSACTIONS Administrative and Workforce Related Services We do not directly employ any of the individuals responsible for managing or operating our business nor do we have any directors. Enbridge and its affiliates provide management and we obtain managerial, administrative, operational and workforce related services from our General Partner, Enbridge Management and affiliates of Enbridge pursuant to service agreements among our General Partner, Enbridge Management, affiliates of Enbridge, and us. Pursuant to these service agreements, we have agreed to reimburse our General Partner, Enbridge Management and affiliates of Enbridge, for the cost of managerial, administrative, operational and director services they provide to us. Where directly attributable, the cost of all compensation, benefits expenses and employer expenses for these employees are charged directly by Enbridge to the appropriate affiliate. Enbridge does not record any profit or margin for the administrative and operational services charged to us. The affiliate amounts incurred by us for services received pursuant to the services agreements are reflected in “Operating and administrative affiliate” on our consolidated statements of income. Enbridge and its affiliates allocated direct workforce costs to us for our construction projects of $28.4 million and $32.6 million for the year ended December 31, 2016 and 2015, respectively, that we recorded as additions to “Property, plant and equipment, net” on our consolidated statements of financial position. Service Agreements Our General Partner, Enbridge Management, Enbridge and affiliates of Enbridge provide managerial, administrative, operational and director services to us pursuant to service agreements, and we reimburse them for the costs of those services. Through an operational services agreement among Enbridge and Enbridge Operational Services, Inc., or EOSI, whom we refer to as the Canadian service provider, and us, we are charged for the services of Enbridge employees resident in Canada. Through a general and administrative services agreement among us, our General Partner, Enbridge Management and Enbridge Employee Services, Inc., or EES, we are charged for the services of employees resident in the United States. The charges related to these service agreements are included in “Operating and administrative affiliate” expenses on our consolidated statements of income. Operational Services Agreement We are charged an amount by the Canadian service providers for services we are provided under the operational services agreement. The amount we are charged is established as part of the annual budget and agreed upon by us and the Canadian service providers. The amount we are charged is computed based on an estimate of the pro-rata reimbursement of each Canadian service provider’s estimated annual departmental costs, net of amounts charged to other affiliates and amounts identifiable as costs of that Canadian service provider. The Canadian service providers charge us a monthly fixed fee that is computed as one-twelfth of the annual budgeted amount. Under the operational services agreement, our General Partner and Enbridge Management pay the Canadian service providers a monthly fee determined in the manner described above. At the request of Enbridge Management, the fee for these operational services provided to it in its capacity as the delegate of our General Partner are billed directly to us. Enbridge Management and our General Partner may request that the Canadian service providers provide special additional operational services for which each, as appropriate, agrees to pay costs and expenses incurred by the Canadian service provider in connection with providing the special additional operational services. The types of services provided under the operational services agreement include: • Executive, administrative and other services on an “as required” basis; • Monitoring transportation capacity, scheduling shipments, standardizing integrity, maintenance and other operational requirements; • Addressing regulatory matters associated with the liquids pipeline operations; • Providing monthly measurement information, forecasts, oil accounting, invoicing and related services; • Computer application development and support services, including liquid pipelines’ control center operations; • Electrical power requirements and costs for system operations; • Patrol and aircraft services; and • Any other operational services required to operate existing systems and any additional systems acquired by us. Each year, the Canadian service providers prepare annual budgets by departmental cost center for their respective operations. After establishing a budget for the following year, the costs associated with each department are allocated to us, our General Partner, Enbridge Management and other Enbridge affiliates using one of the following three methods: • Capital assets employed as a percentage of Enbridge-wide capital assets; • Time-based estimates; or • Full-time-equivalent (FTE)/headcount as a percentage of Enbridge-wide FTEs. The total amount we reimbursed the Canadian service providers pursuant to the operational services agreement for the years ended December 31, 2016, 2015 and 2014, was $322.7 million, $213.0 million and $150.9 million, respectively. General and Administrative Services Agreement We, Enbridge Management and our General Partner receive services from EES under the general and administrative services agreement. Under this agreement, EES provides services to us, Enbridge Management and our General Partner and charges each recipient for services, on a monthly basis, the actual costs that it incurs for those services. Our General Partner and Enbridge Management may request that EES provide special additional general services for which each, as appropriate, agrees to pay costs and expenses incurred by EES in connection with providing the special additional general services. The types of services provided under the general and administrative services agreement include: • Accounting, tax planning and compliance services, including preparation of financial statements and income tax returns; • Administrative, executive, legal, human resources and computer support services; • Insurance coverage; • All administrative and operational services required to operate existing systems and any additional systems acquired by us and operated by EES; and • Facilitate the business and affairs of Enbridge Management and us, including, but not limited to, public and government affairs, engineering, environmental, finance, audit, operations and operational support, safety/compliance and other services. EES captures all costs that it incurs for providing the services by cost center in its financial system. The cost centers are determined to be “Shared Service,” “Enbridge Energy Partners, L.P. only” or “Non-Enbridge Energy Partners, L.P.” Shared Service cost centers are used to capture costs that are not specific to a single United States Enbridge entity but are shared among multiple United States Enbridge entities. The costs captured in the cost centers that are specific to us are charged in full to us. The costs captured in cost centers that are outside of our business unit are charged to other Enbridge entities. The general method used to allocate the Shared Service costs is established through the budgeting process and reimbursed as follows: • Each cost center establishes a budget. • Each cost center manager estimates the amount of time the department spends on us and entities that are not directly affiliated with us. • Costs are accumulated monthly for each cost center. • The actual costs accumulated monthly by each cost center are allocated to us or entities that are not directly affiliated with us based on the allocation model. • We reimburse EES for its share of the allocated costs. The total amount reimbursed by us for services received pursuant to the general and administrative services agreement for the years ended December 31, 2016, 2015 and 2014, was $160.1 million, $294.0 million and $179.0 million, respectively. Line 6A and 6B Expense Reimbursement For the years ended December 31, 2016, 2015 and 2014, we reimbursed Enbridge $0.1 million, $0.1 million and $0.4 million, respectively, for its assistance with the administration and clean-up efforts for our Line 6A and 6B crude oil releases. For further details related to our Line 6A and 6B crude oil releases, refer to Note 22. Commitments and Contingencies Lakehead Lines 6A and 6B Crude Oil Releases. Enbridge Management Pursuant to the delegation of control agreement between Enbridge Management, our General Partner and us, and our partnership agreement, we pay all expenses relating to Enbridge Management. These expenses were not material during the years ended December 31, 2016, 2015 and 2014. This includes Texas franchise taxes and other capital-based foreign, state and local taxes not otherwise paid or reimbursed pursuant to a tax indemnification agreement between Enbridge and Enbridge Management on behalf of Enbridge Management. Insurance Allocation Agreement Through an allocation agreement with Enbridge and another Enbridge subsidiary, we participate in the comprehensive insurance program that is maintained by Enbridge for it and its subsidiaries. Under this agreement, in the unlikely event multiple insurable incidents occur which exceed coverage limits within the same insurance period, the total insurance coverage will be allocated among the Enbridge entities on an equitable basis. Sale of Accounts Receivable Certain of our subsidiaries are party to a receivables purchase agreement, which we refer to as the Receivables Agreement, with an indirect wholly-owned subsidiary of Enbridge. Pursuant to the Receivables Agreement, the Enbridge subsidiary will purchase on a monthly basis, for cash, current accounts receivable and accrued receivables, or the receivables, of the respective subsidiaries initially up to a monthly maximum of $450.0 million. Following the sale and transfer of the receivables to the Enbridge subsidiary, the receivables are deposited in an account of that subsidiary, and ownership and control are vested in that subsidiary. The Enbridge subsidiary has no recourse with respect to the receivables acquired from these operating subsidiaries under the terms of and subject to the conditions stated in the Receivables Agreement. We and MEP act in an administrative capacity as collection agents on behalf of the Enbridge subsidiary and can be removed at any time in the sole discretion of the Enbridge subsidiary. We have no other involvement with the purchase and sale of the receivables pursuant to the Receivables Agreement. The Receivables Agreement was amended in June 2016 to extend the termination date to December 30, 2019. For the years ended December 31, 2016 and 2015, we sold and derecognized receivables of $3,486.3 million and $3,710.4, million respectively, to the Enbridge subsidiary and received cash proceeds of $3,484.7 million and $3,709.3 million, respectively. Consideration for the receivables sold is equivalent to the carrying value of the receivables less a discount for credit risk. The difference between the carrying value of the receivables sold and the cash proceeds received is recognized in “Operating and administrative affiliate” expense in our consolidated statements of income. For the years ended December 31, 2016 and 2015, the expense stemming from the discount on the receivables sold was not material. As of December 31, 2016 and 2015, we had $24.5 million and $19.0 million, respectively, in “Restricted cash” on our consolidated statements of financial position, for cash collections related to sold and derecognized receivables that have yet to be remitted to the Enbridge subsidiary. As of December 31, 2016 and 2015, outstanding receivables of $354.7 million and $317.0 million, respectively, which had been sold and derecognized, had not been collected on behalf of the Enbridge subsidiary. Facilities Cost Reimbursement Agreement We have an agreement with Enbridge Pipelines to install and operate certain sampling and related facilities for the purpose of improving the quality of crude oil and the transportation services on our Lakehead system, which directly increases the transportation services revenue of Enbridge Pipelines. As compensation for installing and operating these transportation facilities, Enbridge Pipelines makes annual payments to us on a cost of service basis. For the years ended December 31, 2016, 2015 and 2014, we recorded approximately $0.7 million, $0.8 million and $0.8 million, respectively, in “Transportation and other services affiliate” on our consolidated statements of income for providing these transportation services. Lease and Storage Services Agreement We have an agreement with Illinois Extension Pipeline Company, L.L.C., or IEPC, an equity method investment of our General Partner, pursuant to which IEPC built two storage tanks at our storage facility in Flanagan, Illinois. We lease the tanks from IEPC and operate them. IEPC will pay us operating fees for the operation of the tanks. For the year ended December 31, 2016, IEPC paid no operating fees to us. Affiliate Revenues and Purchases We sell NGLs and crude oil at market prices on the date of sale to Enbridge and its affiliates. The sales to Enbridge and its affiliates are presented in “Commodity sales affiliate” on our consolidated statements of income. We also record operating revenues in our Liquids segment for storage, transportation and terminaling services we provide to affiliates, which are presented in “Transportation and other services affiliate” on our consolidated statements of income. We also purchase NGLs and crude oil from Enbridge and its affiliates for sale to third parties at market prices on the date of purchase. Purchases of NGLs and crude oil from Enbridge and its affiliates are presented in “Commodity costs affiliate” on our consolidated statements of income. For the years ended December 31, 2016, 2015 and 2014, we incurred $19.9 million, $18.4 million and $21.9 million, respectively, of pipeline transportation and demand fees from the Texas Express NGL system for our Natural Gas business. These expenses are included in “Commodity costs affiliate” on our consolidated statements of income. Our natural gas business has made commitments to transport up to 120,000 Bpd of NGLs on the Texas Express NGL system by 2022. The current commitment is 29,000 Bpd and the average commitment level will increase to 75,000 Bpd in 2017. General Partner Equity Transactions Our General Partner owns an effective 2% general partner interest in us. The cash distributions we make to our General Partner exclude an amount equal to 2% of the i-units, which we retain from the General Partner to maintain its 2% general partner interest in us. Our General Partner’s outstanding ownership interests on us at December 31, 2016 and 2015, and the total distributions we paid to the General Partner for the years ending December 31, 2016, 2015 and 2014 were as follows: General Partner’s Ownership Interests Cash Distributions Paid to (in units) (percentage) (in millions) Type of Unit 2016 2015 2016 2015 2016 2015 2014 Series 1 preferred units (1) 48,000,000 48,000,000 9.7 % 9.9 % $ $ $ Class D units 66,100,000 66,100,000 13.3 % 13.6 % $ 154.1 $ 152.4 $ 69.8 Class E units 18,114,975 18,114,975 3.7 % 3.7 % $ 42.2 $ 31.5 $ Class A common units 46,518,336 46,518,336 9.4 % 9.6 % $ 108.5 $ 107.3 $ 102.2 Class B common units 7,825,500 7,825,500 1.6 % 1.6 % $ 18.2 $ 18.1 $ 17.3 IDUs 1,000 1,000 0.0 % 0.0 % $ 20.9 $ 17.0 $ 2.8 General Partner interest (2) 2.0 % 2.0 % $ 17.3 $ 16.8 $ 79.5 Enbridge Management shares (Listed and Voting) (3) 9,566,358 8,564,645 2.0 % 1.8 % $ $ $ Total 196,126,169 195,124,456 41.7 % 42.2 % $ 361.2 $ 343.1 $ 271.6 (1) For each of the years ended December 31, 2016, 2015 and 2014, total distributions of $90.0 million were accured for the series 1 preferred units in the consolidated statements of financial position. (2) For the year ended December 31, 2014, we paid $2.9 million in total incentive distributions to the General Partner before the IDUs were issued. (3) For the years ended December 31, 2016, 2015, and 2014, we made total non-cash distributions of $20.9 million, $18.9 million, and $16.8 million, respectively, to the Listed and Voting Shares of Enbridge Management owned by the General Partner. Financing Transactions with Affiliates EUS 364-day Credit Facility On July 26, 2016, we entered into an unsecured revolving 364-day credit agreement with EUS, which we refer to as the EUS 364-day Credit Facility. The EUS 364-day Credit Facility is a committed senior unsecured revolving credit facility that permits aggregate borrowings of up to, at any one time outstanding, $750.0 million, (1) on a revolving basis for a 364-day period and (2) for a 364-day term on a non-revolving basis following the expiration of the revolving period. Loans under the EUS 364-day Credit Facility accrue interest based, at our election, on either the Eurocurrency rate or a base rate, in each case, plus an applicable margin. The EUS 364-day Credit Facility terminates on July 25, 2017. At that time, we may elect to convert any outstanding borrowings to term loans, which would mature on July 24, 2018. As of December 31, 2016, we had $750.0 million in outstanding borrowings under this facility. The commitment under the EUS 364-day Credit Facility may be permanently reduced by EUS, from time to time, by up to an amount equal to the net cash proceeds to us from the sale by us of (1) debt or equity securities in a registered public offering, or (2) limited partnership interests in Midcoast Operating to MEP. Joint Funding Arrangement for Line 3 Replacement On January 26, 2017, our Board of Directors approved a joint funding agreement with our General Partner for the U.S L3R Program. Under the terms of the agreement, our General Partner will fund 99% and we will fund 1% of the capital cost of the U.S. L3R Program, with an option for us to increase our interest up to 40% in the U.S. portion at book value at any time up to four years after the project goes into service. Our General Partner paid us approximately $450 million for its 99% interest in the project, including our share of the construction costs to date. Joint Funding Arrangement for Alberta Clipper Pipeline Until January 2, 2015, we had a joint funding arrangement with several of our affiliates and affiliates of Enbridge to finance the construction of the United States segment of the Alberta Clipper Pipeline, which we refer to as the Series AC. On January 2, 2015, we completed the Drop Down transaction pursuant to which the General Partner and its affiliates contributed to us the remaining 66.7% interest in the U.S. segment of the Alberta Clipper Pipeline in exchange for approximately 18,114,975 units of a new class of limited partner interests designated as Class E units with a fair value of $767.7 million. As part of the joint funding arrangement, we had borrowings outstanding and payable to our General Partner under a promissory note, which we refer to as the A1 Term Note. As part of the Drop Down, we repaid the borrowings outstanding of $306.0 million on the A1 Term Note. We incurred interest expense under the A1 Term Note of $24.3 million for the year ended December 31, 2014. We have presented the amounts in “Interest expense, net” on our consolidated statements of income. Distribution to Series AC Interests The following table presents the distributions paid by the OLP during the years ended December 31, 2015 and 2014, to our General Partner and its affiliate, representing the noncontrolling interest in the Series AC, and to us, as the holders of the Series AC general and limited partner interests. The distributions were declared by the board of directors of Enbridge Management, acting on behalf of Enbridge Pipelines (Lakehead) L.L.C., the managing general partner of the OLP and the Series AC interests. Pursuant to the OLP’s partnership agreement, the final ownership distribution for the Series AC interests was distributed to Series AC partners of record as of the last day of the fourth quarter of 2014. Distribution Distribution Amount Paid Amount Paid to the Total Series AC (in millions) 2015 January 29 February 13 $ 13.7 $ 27.5 $ 41.2 2014 October 31 November 14 $ 10.1 $ 20.3 $ 30.4 July 31 August 14 7.4 14.8 22.2 April 30 May 15 6.6 13.1 19.7 January 30 February 14 6.4 12.8 19.2 $ 30.5 $ 61.0 $ 91.5 Amendment of OLP Limited Partnership Agreement On July 30, 2015, the partners amended and restated the limited partnership agreement of the OLP pursuant to which our General Partner temporarily did not receive Series EA and ME, collectively, the Series, distributions from the quarter ended June 30, 2015, through the quarter ended March 31, 2016. The General Partner’s capital funding contribution requirements for each of those two Series, commencing in August 2015, were reduced by the amount of its foregone cash distributions from the respective Series, until the earlier of December 31, 2016 and the date aggregate reductions in capital contributions for such Series are equal to the foregone cash distributions for such Series. As of December 31, 2016, capital contributions offset foregone cash distributions. We have a joint funding arrangement with the General Partner that established an additional series of partnership interests in the OLP, which we refer to as the EA interests. The EA interests were created to finance the Eastern Access Projects to increase access to refineries in the U.S. Upper Midwest and in Ontario, Canada for light crude oil produced in western Canada and the United States. As of December 31, 2016, our General Partner owned 75% of the EA interests, and, except as described above in Amendment of OLP Limited Partnership Agreement Our General Partner made equity contributions totaling $13.8 million, $119.3 million and $622.5 million to the OLP for the years ended December 31, 2016, 2015 and 2014, respectively to fund its equity portion of the construction costs associated with the Eastern Access Projects. During December 2015, the OLP made equity distributions of $81.6 million to our General Partner, representing return of capital for excess capital funds contributed by our General Partner to the Eastern Access Projects. This is included in “Distributions to noncontrolling interest” presented in our statement of cash flows. Distribution to Series EA Interests The following table presents distributions paid by the OLP during the years ended December 31, 2016, 2015 and 2014, to our General Partner and its affiliate, representing the noncontrolling interest in the Series EA, and to us, as the holders of the Series EA general and limited partner interests. The distributions were declared by the board of directors of Enbridge Management, acting on behalf of Enbridge Pipelines (Lakehead), L.L.C., the managing general partner of the OLP and the Series EA interests. Distribution Distribution Amount Paid Amount Paid to the Total Series EA (in millions) 2016 October 28 November 14 $ 21.6 $ 64.7 $ 86.3 July 28 August 12 21.0 63.0 84.0 April 29 May 13 79.0 79.0 January 29 February 12 79.2 79.2 $ 200.8 $ 127.7 $ 328.5 2015 October 30 November 13 $ 76.1 $ $ 76.1 July 30 August 14 75.4 75.4 April 30 May 15 17.5 52.3 69.8 January 29 February 13 22.3 67.0 89.3 $ 191.3 $ 119.3 $ 310.6 2014 October 31 November 14 $ 14.6 $ 43.7 $ 58.3 July 31 August 14 5.6 16.7 22.3 April 29 May 15 2.5 6.5 9.0 $ 22.7 $ 66.9 $ 89.6 Joint Funding Arrangement for U.S. Mainline Expansion Projects We have a joint funding arrangement with the General Partner that establishes another series of partnership interests in the OLP, which we refer to as the ME interests. The ME interests were created to finance the Mainline Expansion Projects to increase access to the markets of North Dakota and western Canada for light oil production on our Lakehead System between Neche, North Dakota and Superior, Wisconsin. Our General Partner owns 75% of the ME interests, and, except as described above in Amendment of OLP Limited Partnership Agreement Our General Partner made equity contributions totaling $90.0 million, $673.3 million and $577.5 million to the OLP for the years ended December 31, 2016, 2015 and 2014, respectively, to fund its equity portion of the construction costs associated with the U.S. Mainline Expansion Projects. During December 2015, the OLP made equity distributions of $71.5 million to our General Partner, representing return of capital for excess capital funds contributed by our General Partner to the U.S. Mainline Expansion Projects. This is included in “Distributions to noncontrolling interest” presented in our statement of cash flows. Distribution to Series ME Interests The following table presents distributions paid by the OLP during the years ended December 31, 2016, 2015 and 2014, to our General Partner and its affiliate, representing the noncontrolling interest in the Series ME, and to us, as the holders of the Series ME general and limited partner interests. The distributions were declared by the board of directors of Enbridge Management, acting on behalf of Enbridge Pipelines (Lakehead), L.L.C., the managing general partner of the OLP and the Series ME interests. Distribution Distribution Amount Paid Amount Paid to the Total Series ME (in millions) 2016 October 28 November 14 $ 14.8 $ 44.3 $ 59.1 July 28 August 12 13.1 39.4 52.5 April 29 May 13 43.2 43.2 January 29 February 12 40.8 40.8 $ 111.9 $ 83.7 $ 195.6 2015 October 30 November 13 $ 32.5 $ $ 32.5 July 30 August 14 19.7 19.7 April 30 May 15 1.5 4.5 6.0 January 29 February 13 1.8 5.2 7.0 $ 55.5 $ 9.7 65.2 2014 October 31 November 14 $ 0.6 $ 1.9 $ 2.5 Distribution from MEP The following table presents distributions paid by MEP during the years ended December 31, 2016, 2015 and 2014, to its public Class A common unitholders, representing the noncontrolling interest in MEP, and to us for our ownership of Class A common units. Distribution Distribution Amount Paid Amount Paid to the Total MEP (in millions) 2016 October 27 November 14 $ 8.9 $ 7.6 $ 16.5 July 27 August 12 8.9 7.6 16.5 April 28 May 13 8.9 7.6 16.5 January 28 February 12 8.9 7.6 16.5 $ 35.6 $ 30.4 $ 66.0 2015 October 29 November 13 $ 8.9 $ 7.6 $ 16.5 July 29 August 14 8.8 7.5 16.3 April 29 May 15 8.6 7.4 16.0 January 28 February 13 8.5 7.3 15.8 $ 34.8 $ 29.8 $ 64.6 2014 October 30 November 14 $ 8.4 $ 7.2 $ 15.6 July 31 August 14 8.1 6.9 15.0 April 29 May 15 7.8 6.6 14.4 January 29 February 14 4.2 3.5 7.7 $ 28.5 $ 24.2 $ 52.7 Other Agreements with MEP Omnibus Agreement We, Midcoast Holdings, L.L.C., or the MEP General Partner, MEP, and Enbridge, are party to the Omnibus Agreement to which we agreed to indemnify MEP for certain matters, including environmental, right-of-way and permit matters, and we granted MEP a license to use the Enbridge logo and certain other trademarks and tradenames. The Omnibus Agreement may be terminated by the mutual agreement of the parties, or by either Enbridge or MEP in the event that we cease to control the MEP General Partner, provided that our indemnification obligations will remain in full force and effect until they expire in accordance with their respective terms. Under the Omnibus Agreement, we also agreed to indemnify MEP for all known and certain unknown environmental liabilities that are associated with the ownership or operation of MEP’s assets arising prior to the closing of MEP’s initial public offering, or the Offering, in each case that are identified prior to the third anniversary of the closing of that offering. Our obligation to indemnify MEP for any environmental liabilities is subject to a $500,000 aggregate deductible before MEP is entitled to indemnification. We will also indemnify MEP for failure to have certain rights-of-way, consents, licenses and permits necessary to own and operate its assets in substantially the same manner in which they were owned and operated prior to the closing of the Offering, including the cost of curing certain such failures that do not allow its assets to be operated in accordance with prudent industry practice, in each case that are identified prior to the third anniversary of the closing of the Offering. Our obligation to indemnify MEP for any right-of-way, consent, license or permit matters will be subject to a $500,000 aggregate deductible before MEP is entitled to indemnification. There will be a $15.0 million aggregate cap on the amounts for which we will indemnify MEP for environmental, right-of-way, consents, licenses and permit matters under the Omnibus Agreement. During the year ended December 31, 2016, we paid indemnification proceeds to MEP under the Omnibus Agreement of $12.2 million for the acquisition of title to right-of-way assets that were pending at the time of MEP’s initial public offering and associated legal fees. No other payments have been made to MEP under the Omnibus Agreement. Intercorporate Services Agreement We are party to an Intercorporate Service Agreement, or the Intercorporate Services Agreement, with MEP, pursuant to which we will provide MEP with the following services: • executive, management, business development, administrative, legal, human resources, records and information management, public affairs, investor relations, government relations and computer support services; • accounting and tax planning and compliance services, including preparation of financial statements and income tax returns, unitholder tax reporting and audit and treasury services; • strategic insurance advice, planning and claims management and related support services, and arrangement of insurance coverage as required; • facilitation of capital markets access and financing services, cash management and related banking services, financial structuring and advisory services, as well as credit support for MEP’s subsidiaries and affiliates on an as-needed basis for projects, transactions or other purposes; • operational and technical services, including integrity, safety, environmental, project management, engineering, fundamentals analysis and regulatory, and pipeline control and field operations; and • other services as MEP may request. Under the Intercorporate Services Agreement, MEP will reimburse us and our affiliates for the costs and expenses incurred in providing such services to MEP; however, we reduce the amounts payable for general and administrative expenses that otherwise would have been allocable to Midcoast Operating by $25.0 million annually. Financial Support Agreement We are party to a Financial Support Agreement with Midcoast Operating, or the Financial Support Agreement, pursuant to which we will provide letters of credit and guarantees, not to exceed $700.0 million in the aggregate at any time outstanding, in support of Midcoast Operating’s and its wholly owned subsidiaries’ financial obligations under derivative agreements and natural gas and NGL purchase agreements to which Midcoast Operating, or one or more of its wholly owned subsidiaries, is a party. Under the Financial Support Agreement, our support of Midcoast Operating’s and its wholly owned subsidiaries’ obligations will terminate on the earlier of (1) November 13, 2017, and (2) the date on which we own, directly or indirectly (other than through our ownership interests in MEP), less than 20% of the total outstanding limited partner interests in Midcoast Operating. The Financial Support Agreement also provides that if MEPs bank credit agreement is secured, the Financial Support Agreement also will be secured to the same extent on a second-lien basis. We also have agreed to subordinate our right to payment on obligations owed under the Financial Support Agreement and liens, if secured, to the rights of the lenders under the MEP credit agreement. At December 31, 2016, we had no letters of credit outstanding and utilized $39.9 million of guarantees to Midcoast Operating under a Financial Support Agreement with Midcoast Operating. At December 31, 2015, we provided $7.5 million of letters of credit outstanding and utilized $21.7 million of guarantees to Midcoast Operating under this agreement. |
