Enbridge Income Fund Holdings Inc. 2016 Annual Report/media/Income Fund...net generating capacity...

Enbridge

IncomeFund

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Inc.2016

AnnualR

eport

Enbridge IncomeFund Holdings Inc.2016Annual Report

A low-risk businessmodel deliveringreliable, predictablecash flows andstable dividendgrowth to ourinvestors

OurStructure

1 The Fund Group is comprised of the Enbridge Income Fund (the Fund) and its direct and indirect investees, Enbridge Commercial Trust (ECT) and Enbridge Income Partners LP (EIPLP),which holds the operating assets through its subsidiaries and investees.

2 ENF’s business is limited to its ownership interest in the Fund. At December 31, 2016, ENF held 56.9 percent of the issued ordinary trust units (Fund Units) in the Fund and an approximate16.4 percent overall economic interest in the Fund Group. ENF’s corporate structure is discussed in greater detail in Enbridge Income Fund Holding's Financial Statements and

1. The Fund Group1

• Holds a diversified portfolio of strategicallypositioned energy infrastructure assetswith low-risk business models

• Pays distributions to its unitholders(ENF and Enbridge Inc.)

• Is managed by Enbridge Inc.,North America's largest energyinfrastructure company

2. Enbridge IncomeFund Holdings (ENF)2

• Publicly traded company (ENF.TO)

• Receives cash flow through ownershipinterest in the Fund Group

3. ENF Shareholders• Receive stable and predictable dividends

• 10 percent expected dividend growthannually through 2019

• Low-risk investment

EdmontonEdmonton

HardistyHardisty

Fort McMurrayCheechamFort McMurrayCheecham

SuperiorSuperior

CushingCushing

PatokaPatoka

Bu�alo

ToledoChicagoChicago

Bu�alo

CromerGretna

Fort St. JohnFort St. John

Regina

Cromer

ManhattanManhattan

St. JohnSt. John

Gretna

ClearbrookClearbrook

Toledo

MontrealMontreal

CANADA

UNITED STATESUNITED STATES

CANADA

Liquids Pipelines

Southern Lights U.S.

Gas Pipelines

Other Enbridge Pipelines

Contract Storage

Wind Farms

Solar Farms

Waste Heat Recovery

Fund GroupCURRENT ASSETS

$ $

ENF Dividends

$

High-Quality Assets

SuperiorSuperiorSuperiorSuperiorSuperiorSuperior

ToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledo

ENF DividendsENF DividendsENF DividendsENF DividendsENF DividendsENF DividendsENF DividendsENF DividendsENF DividendsENF DividendsENF DividendsENF DividendsENF DividendsENF DividendsENF DividendsENF DividendsENF DividendsENF DividendsENF DividendsENF DividendsENF DividendsENF Dividends

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Management’s Discussion and Analysis available at enbridgeincomefund.com/report-delivery.

2016 Annual Report 1

ENF is a premier Canadian energy infrastructure investment vehiclefor those seeking predictable and growing dividend income froma diversified portfolio of high-quality liquids pipelines, natural gastransmission and renewable power generation assets. The ENFbusiness is specifically designed to perform predictably andconsistently in all market conditions, and has produced a consistenttrack record of increasing dividends for shareholders. Since 2006,the Company's annual dividend has increased by 120 percent.

This growth has been achieved organically through extensionand expansion of existing assets and throughof additional low-risk energy infrastructure from Enbridge Inc.These assets, held in the Fund Group, play a critical role infueling the quality of life for millions of people, every day.The Company's low-risk business model is supported by solidbusiness fundamentals; minimal direct exposure to commodityprices and interest and foreign exchange rates; and long-termcommercial agreements with strong creditworthy counterparties.

On the strength of the Fund Group's existing assets andcommercially secured growth projects, ENF is expected todeliver dividend increases of 10 percent annually through 2019.

A Premier CanadianEnergy InfrastructureInvestment Vehicle

“The Fund Group’s assets performed wellin 2016, execution of the secured growthprogram moved ahead on schedule andwe see strong prospects for additionalgrowth opportunities beyond 2019.We are confident that ENF’s low-riskbusiness model will continue to deliverstrong, predictable returns to ourinvestors well into the future.”–Perry Schuldhaus, President,

Enbridge Income Fund Holdings Inc.

DividendReinvestmentPlan (DRIP)An E�cient Way to Invest

ENF o�ers a dividend reinvestment plan through which shareholderscan automatically reinvest cash dividends into additional ENF sharesat a two-percent discount to the market price. DRIP participants arealso eligible to purchase up to an additional $20,000 in ENF shareswithout incurring brokerage fees.

The DRIP allows our shareholders to cost-e�ectively increase theirholdings in ENF, and it provides us with an additional source of fundsfor investment in the Fund on an ongoing basis.

For more information on the DRIP and how to enroll,please visit enbridgeincomefund.com/DRIP

drop-downs

Investment Proposition

2 Enbridge Income Holdings Inc.

>7%ENF has delivered compoundaverage annual dividend-per-share growth of over sevenpercent in the last 10 years.

Delivering Solid Valuefor Our Shareholders

$9BThe Fund Group’s diversifiedportfolio of assets and $9-billionsuite of commercially securedgrowth projects currently inexecution are expected toprovide strong and predictablecash flow growth through 2019and beyond.

+10%We expect to increase ENF’sdividend by 10 percent annuallythrough 2019 on the strength ofthe Fund Group's existing assetsand secured-growth program.

ENF is a sound choice for investors looking for a low-riskinvestment with solid growth potential that can performpredictably through any market condition.

10-year CAGR from 2006 through 2016 = 7.3 percent; 5-year CAGR from 2011 to 2016 = 9.9 percent;2017e = monthly dividend of $0.1711 per share, annualized.

ConsistentDividendGrowth

$2.50

$2.00

$1.50

$1.00

$0.50

$0.00

10-year CAGR1 = 7.3%

Annua

l 10%

Incr

ease

sth

roug

h

2019

Antic

ipat

ed

Taxable distribution paid by the Fund prior to restructuring in December 2010

Eligible dividend paid by ENF post restructuring

Expected eligible dividend paid by ENF on an annualized basis

1.59

2.05

1.87

1.24

0.9

6 1.03

1.15 1.17

1.34 1.4

0

1.15

0.9

3

06 07 08 09 10 11 12 13 14 15 16 17e 19e

1 Compound Annual Growth Rate of an investment over a specified time period.

10%


Quality Assets• A diversified portfolio of low-risk

energy infrastructure assets inNorth America, strategically positionedbetween established and growingproducing basins and markets lookingfor secure supply

• Liquids: Preeminent Canadianliquids pipeline assets; includes theCanadian Mainline system, which shipsapproximately 2.6 million barrels perday (bpd) of crude oil from WesternCanada to the United States and

deliveries in late 2016 and early 2017

• Gas: The fully contracted AlliancePipeline (Alliance) connects agrowing supply of natural gasfrom Western Canada’s most prolificliquids-rich basins to key markets inthe U.S. Midwest

• Green Power: Diversifiedgeographically and underpinned bylong-term, fixed-price power purchaseagreements, providing over 1 GW ofnet generating capacity

Stability• Highly reliable, low-risk business

model designed to provide strong andpredictable results in all market conditions

• Minimal commodity price andthroughput exposure: <1 percent of cashflow exposed to movements in marketprices (commodity prices, interest ratesand foreign exchange rates)

• Minimal contract risk: 99 percentof cash flow underpinned by long-term commercial agreements withstrong counterparties

Growth• Highly visible and secured $9-billion

capital program currently in executionthrough 2019

• ~$3.7 billion of projects expectedto be placed into service in 2017

• Growth projects contribute additionalsources of cash flow that drive projecteddividend growth of 10 percent per annumthrough 2019

• Strategic positioning of existing assetsprovides a strong platform to extendgrowth beyond 2019

• Over 350,000 bpd of expansionpotential to the Mainline system througha series of e�cient and low-costexpansion projects beyond those thatare already secured and in execution

• Additional expansion opportunitieson Alliance

Underpinned by the Fund Group’s strongportfolio of highly reliable and low-risk businesses,ENF is well-positioned to provide solid returnsto shareholders well into the future.

eastern Canada; achieved record

Letter to Investors


Strong Results,Growing ReturnsENF’s business model proved its resiliencein 2016, delivering strong results anddividend increases despite challengingconditions in broader energy markets.

We’re pleased to report that ENF onceagain delivered on its value propositionto shareholders despite a challengingyear that included prolonged lowcommodity prices and impacts fromwildfires in northeastern Alberta. ENF'slow-risk business model is designedto deliver strong results in all marketconditions–producing predictable andgrowing cash flow, which in turn deliverspredictable and growing dividends forour investors.

ENF derives its cash flow from adiversified portfolio of high-quality,strategically located energy deliveryand power generation assets that areowned by the Fund Group. This cashflow is stable and predictable because99 percent of it is underpinned bylong-term commercial agreementswith strong, creditworthy customers.

In addition, ENF shareholders are expectedto benefit from the Fund Group’s $9-billiongrowth capital program that is currentlyin execution. This program includes a suiteof commercially secured liquids pipelinesprojects, three of which will be completedin 2017 and one will be completed in 2019.True to our business model, the recentlycompleted projects, as well as thoseunder construction, are underpinnedby low-risk commercial arrangements.These arrangements will generate

to provide growing cash flow over the firstfive to seven years following the in-servicedates. This growing cash flow from thenewly invested capital supports ENF’sprojected dividend growth over thenext few years.

The strength of the Fund Group’s threemain business segments (liquids pipelines,

gas pipelines and green energy),in combination with its secured growthprogram provides us with confidence thatwe will deliver 10-percent increases in ENF’sdividend each year through 2019. Lookingbeyond 2019, the Fund Group will continueto leverage the competitive position of itsassets to pursue further expansions andorganic growth, while also exploring othernon-organic acquisition opportunities thatfit within our low-risk business model.

Solidfinancial performance

Our business model proved its resiliencein 2016, delivering strong results in line withguidance as well as year-over-year dividendincreases. Notably, the Fund Group’sCanadian liquids pipelines business,which includes the Canadian portion ofthe Enbridge Mainline liquids pipeline (theMainline) and Regional Oil Sands systems,performed strongly despite temporary

Perry SchuldhausPresident

Harry RobertsChair, Board of Directors

In January 2017, we increasedENF’s dividend by 10 percent

on the strength of solid earningsand cash flow growth fromthe Fund Group's energyinfrastructure assets.

incremental cash flow, and are structured


impacts to regional and Mainline volumesas a result of the extreme wildfires innortheastern Alberta that curtailed oilsands production in May. The strengthof the Alliance natural gas pipeline andother legacy assets also contributedto cash flow growth over the year.

In 2016, the Fund Group’s Available CashFlow from Operations (ACFFO) totaled$1.8 billion, which represents an increaseof 120 percent over 2015. This increasewas attributable to incremental cash flowsresulting from full-year contributions fromthe liquids pipelines and renewable energyassets the Fund Group acquired fromEnbridge Inc. in September 2015 (the2015 Transaction), as well as new systemexpansion projects that came into servicein the second half of 2015.

ENF has a consistent track record ofannual dividend increases, with a compound

annual growth rate of 9.9 percent overthe last five years. From September 2015 toJanuary 2017, ENF increased its dividend by10 percent three times on the strength of theFund Group’s solid earnings and cash flowperformance from its underlying business.

In 2016, we again demonstrated our abilityto e�ciently raise capital to fund growth,even in di�cult market conditions. In April,we successfully completed a public o�eringand concurrent private placement ofcommon shares for combined gross proceedsof $718 million; and in December, the FundGroup announced the sale of non-core liquidspipelines and related assets in the SouthPrairie Region for $1.08 billion. Both of thesetransactions provided an e�cient source offinancing for the Fund Group’s secured growthcapital program and, together, will addressall of the Fund Group's equity funding needsthrough 2017 for that program.

The Fund Group willcontinue to leveragethe competitive positionof its assets to pursuefurther expansions andorganic growth.

“”

Letter to Investors


Quality assets,strong prospects

LiquidsPipelines

Apart from the temporary impact of theAlberta wildfires, the Mainline ran at nearfull capacity in 2016, with throughputex-Gretna at the Canada-U.S. borderreaching a record 2.6 million barrelsper day (bpd) in December.

We expect the high utilization of theMainline and Regional Oil Sands systemwill continue. These assets are directlyconnected upstream to Alberta’s massiveoil resources, which are expected toexperience further growth from producers’projects currently in execution. The Mainlineis also connected downstream through the

Enbridge pipeline network to many of thebest markets in North America and directlyto 1.9 million bpd of refinery demand, as wellas an additional 1.6 million bpd of indirectrefinery demand through interconnectingpipelines. The scale and reach of theMainline system generates stable andcompetitive tolls for Canadian producers,which is critical in the current low-oil-priceenvironment as it enables them to achievethe best netbacks.

The largest project in the Fund Group’scapital growth program–the $4.9-billion

is progressing and expected to be in servicein 2019. In an important milestone for thisproject and its customers, the Canadianfederal government approved the Canadianportion of L3R in November 2016. Regulatory

In 2017, we expect the following Fund Groupgrowth projects to come on stream:

•

approvals for the U.S. portion of L3R arein progress. This replacement program willenhance the safety of the line and restore itsoriginal capacity of 760,000 barrels a day.Replacing Line 3 is the most timely and reliablesolution for transporting western Canadiancrude oil to the Chicago, U.S. Gulf Coast,eastern U.S. and Canadian refinery markets.

Line 3 Replacement (L3R) Program–

The $2.6-billion Regional Oil SandsOptimization, which consists of two phases,will connect growing oil sands supply tothe Canadian portion of the Mainline.The Athabasca Pipeline Twin project wascompleted in January 2017 and the WoodBu�alo Pipeline Extension is expected tobe in service in December 2017.


•

•

The Fund Group’s liquids pipelinescurrently service nine oil sands projects,which will increase to 11 once theRegional Oil Sands Optimization andJACOS projects are in service.

“”TheMainline ranatnear full capacity in2016,with throughputex-Gretnaat theCanada-U.S.border reachinga record2.6millionbarrelsperday inDecember.

The $0.9-billion Norlite DiluentPipeline will transport diluent fromEdmonton and Fort Saskatchewanto the Fund Group’s Cheecham andAthabasca terminals to meet theneeds of regional oil sands producers,principally the Suncor-operatedFort Hills project.

The $0.2-billion JACOS PipelineProject will connect the JapanCanada Oil Sands Limited (JACOS)Hangingstone Oil Sands Project tothe Cheecham Terminal.

GasPipelines

Alliance, which is 50 percent owned bythe Fund Group, continues to be a high-performing asset and is the only rich-gasexport pipeline out of Western Canada.

With high utilization rates, Alliance isdelivering strong results under its new tollingand service delivery model. Alliance wassuccessfully recontracted on December 1,2015, with firm take-or-pay structuresthrough a combination of receipt-zone andfull-path subscriptions of over 1.3 billioncubic feet per day (bcf/d). These contractshave an average length of approximatelyfive years.

Market fundamentals have created strongdemand for both interruptible and firmseasonal service for Alliance, which isgenerating incremental revenue underthe new tolling model. Alliance has alsobenefited from e�ciencies that havereduced operating costs, and it continuesto be a strong contributor to our revenuesand cash flow.

GreenPower

Through the 2015 Transaction, theFund Group added four new wind projectsto its portfolio– three in Quebec and onein Alberta. The Fund Group is now oneof the largest suppliers of emissions-freeelectricity in Canada with the capacity toproduce 1,437 megawatts of power on agross basis (net to the Fund Group:1,052 megawatts). Its renewable assets are

diversified geographically, which providesa natural portfolio benefit as wind resourceand solar radiance can vary from time totime and across locations. We expect theseassets will continue to provide a stable cashflow stream over the long term.

Acknowledgements

In 2016, we welcomed Laura Cillis andGeorge Lewis to the Board. They addedsignificant expertise, depth and strengthto the governance and stewardship of ENF.As a result of changes at Enbridge Inc.,Charlie Fisher and Cathy Williams resignedas Directors and John Whelen wasappointed to the Board at the endof February 2017. We thank Charlieand Cathy for their service and guidance,and welcome John, who was Presidentof ENF from 2011 to 2014.

Lookingahead

We’re starting out 2017 from a positionof strength, which we expect will translateinto 2017 ACFFO for the Fund Groupof between $1.9 billion and $2.1 billion.Moreover, due to ACFFO growth generatedby the base business and new projectscoming into service, we expect dividendsto increase by a further 10 percent in eachof 2018 and 2019.

Looking beyond 2019, we see additionalpotential for growth. The Fund Group’sassets are well-positioned to be highlyutilized and can be readily extended orexpanded to address customer needs.

Letter to Investors


Due to the high quality and strategic location of theFund Group’s liquids pipelines assets, we believewe’re ideally positioned to advance projects tofurther augment export capacity for Canadianproducers to premium markets in the U.S.

“”

Our Mainline and Regional Oil Sandscustomers are the largest and best capitalizedplayers in the energy space globally.

Many are integrated with downstreamrefining operations or are refiners themselves.Generally, they like to have surplus pipelinecapacity at a certain margin above supplyto ensure pipeline capacity is neverconstrained. Based on the most recentforecast from the Canadian Associationof Petroleum Producers, it is anticipated thatthe Western Canada Sedimentary Basin(WCSB) will produce about 600,000 bpd ofincremental supply through 2020 that willrequire additional pipeline capacity. In thecurrent environment, large and expensivemegaprojects may not necessarily be thebest solution to meet shippers’ needs.The Mainline system provides a low-costoption that can be e�ciently expanded,in stages, to bring on capacity to matchthe pace of supply growth.

Due to the high quality and strategiclocation of the Fund Group’s liquids pipelinesassets, we believe we’re ideally positionedto advance projects to further augment

the export capacity for Canadianproducers to premium markets in the U.S.Therefore, as oil supply grows, we willcontinue to seek out opportunities foradditional cost-e�ective, scalable, low-riskand highly executable incrementalexpansions. This could prove to beparticularly important, given the potentialfor further delays to large-scale liquidspipeline infrastructure projects beingplanned by others.

Because of its strategic geographicpositioning, Alliance, too, has the potentialto be expanded further as natural gassupply from the WCSB grows.

Lastly, there is further acquisition ordrop-down potential from our sponsor,Enbridge–North America’s largest energyinfrastructure company. Our shared toppriority is the safe and reliable operationof our assets. We directly benefit fromEnbridge’s tremendous operationalexpertise and risk management systemsand processes. The Fund Group is alsoable to leverage Enbridge’s majorprojects capability in the development

and construction of its secured growthcapital program.

Going forward, we will continue to optimizethe Fund Group’s existing operations,adhere to prudent financial policies andpractices, and bring our growth projectsinto service on time and on budget.

We’re very pleased with the progress ENFhas made, and we’re confident that ENF’slow-risk business model and growth capitalprogram will continue to deliver strong,predictable and growing returns to ourinvestors well into the future.

Perry F. SchuldhausPresident

Ernest F.H. (Harry) RobertsChair, Board of Directors

March 13, 2017

Management’s Discussion & Analysis

10 Overview

11 Enbridge Income Fund Holdings Inc. Financial Performance

13 Fund Group Objectives and Strategy

13 Liquidity and Capital Resources

14 Related Party Transactions

15 Risk Management and Financial Instruments

16 Future Accounting Policies

16 Critical Accounting Estimates

16 Controls and Procedures

17 Selected Quarterly Financial Information

17 Outstanding Share Data

Financial Statements

18 Management’s Report

19 Independent Auditor’s Report

20 Statements of Comprehensive Income (Loss)

21 Statements of Changes in Shareholders’ Equity

22 Statements of Cash Flows

23 Statements of Financial Position

Notes to the Financial Statements

24 1. General Business Description

24 2. Basis of Preparation

24 3. Summary of Significant Accounting Policies

25 4. Investment in Enbridge Income Fund

26 5. Share Capital and Share Premium

28 6. Income Taxes

29 7. Risk Management

29 8. Fair Value of Financial Instruments

30 9. Capital Disclosures

30 10. Related Party Transactions

156 Glossary

Enbridge Income Fund Holdings Inc.Financial Report

10 Enbridge Income Fund Holdings Inc. 2016 Annual Report

Management’s Discussion & AnalysisFor the Year Ended December 31, 2016This Management’s Discussion and Analysis (MD&A) datedFebruary 17, 2017 should be read in conjunction with the auditedfinancial statements and notes thereto of Enbridge IncomeFund Holdings Inc. (ENF or the Company) for the year endedDecember 31, 2016, prepared in accordance with InternationalFinancial Reporting Standards (IFRS). All financial informationis presented in Canadian dollars, unless otherwise indicated.Additional information related to the Company, including its AnnualInformation Form (AIF), is available on SEDAR at www.sedar.com.

OverviewThe Company is a publicly traded corporation whose commonshares trade on the Toronto Stock Exchange (TSX) under thesymbol ENF. The Company’s business is limited to its ownershipinterest in Enbridge Income Fund (the Fund) and its objective isto pay out a high proportion of available cash in the form of dividendsto shareholders.

The Fund is an unincorporated open-ended trust established by atrust indenture under the laws of the Province of Alberta. The Fund,through its indirect investment in Enbridge Income Partners LP(EIPLP), is involved in the transportation, storage and generationof energy. EIPLP owns interests in liquids transportation and storageassets, including the Canadian Mainline, the Regional Oil SandsSystem, a 50% interest in the Alliance Pipeline system, whichtransports natural gas from Canada to the United States, andinterests in renewable and alternative power generation assets.Readers are encouraged to read EIPLP’s consolidated financialstatements and MD&A which are filed under the Fund’s profileon SEDAR at www.sedar.com.

The unitholders of the Fund are the Company and Enbridge Inc.(Enbridge), a North American transporter, distributor and generatorof energy listed on the TSX and New York Stock Exchange.The Company is managed by Enbridge Management Services Inc.(the Manager or EMSI), a wholly-owned subsidiary of Enbridge.EMSI also serves as the manager of the Fund, Enbridge CommercialTrust (ECT), a wholly-owned investment of the Fund, and EIPLP.EIPLP is a limited partnership between ECT and Enbridge. The Fund,ECT, EIPLP and the subsidiaries and investees of EIPLP are referredto as the Fund Group.

At December 31, 2016, Enbridge held 19.9% of the Company’scommon shares, with the public shareholders holding theremaining 80.1%. Also at December 31, 2016, the Companyheld 56.9% of the issued and outstanding ordinary trust unitsof the Fund (Fund Units) and Enbridge held the remaining 43.1%.The Company’s overall economic interest in the Fund Groupwas 16.4% as at December 31, 2016.

The 2015 Transaction

On September 1, 2015, EIPLP acquired 100% interests in entitiesholding certain Canadian liquids pipelines, storage and renewableenergy assets from Enbridge and certain of its subsidiaries foraggregate consideration of $30.4 billion plus incentive distributionand performance rights and working capital adjustments (the 2015Transaction). The Company did not directly participate in the2015 Transaction.


On November 7, 2014, the Company and the Fund completeda transaction whereby indirect wholly-owned subsidiaries of theFund acquired from Enbridge a 50% equity interest in the UnitedStates portion of the Alliance Pipeline and subscribed for andpurchased Class A Units of certain Enbridge subsidiaries whichprovide a defined cash flow stream from the United States portionof Southern Lights for aggregate consideration of $1.8 billion(the 2014 Transaction). At the time of the 2014 Transaction,the Fund previously owned a 50% investment in the Canadianportion of the Alliance Pipeline.

Management’s Discussion & Analysis 11

Enbridge Income Fund Holdings Inc. Financial PerformanceThe Company’s earnings and cash flows are derived from its investment in the Fund and aredependent upon its ownership interest, the cash distributions per unit paid by the Fund and incometaxes. Readers are encouraged to read the Fund’s financial statements and MD&A which are filedon SEDAR at www.sedar.com.

Three months endedDecember 31,

Year endedDecember 31,

2016 2015 2016 2015 2014(millions of Canadian dollars, except per unit, per share and share amounts)

FundUnit distribution per unit 0.5376 0.4723 2.1504 1.8892 1.6674

Cashdistributions declared to holders of FundUnits 117 86 454 213 114

Percentageof FundUnits held byENF 56.8% – 56.9% 42.8% – 50.8% 50.8% – 56.9% 42.8% – 88.1% 85.6% – 88.1%

Distribution income, ENF 67 41 252 141 99

Interest incomeandother – 1 2 2 1

Income taxes – (1) (2) (5) (6)

Earnings, ENF 67 41 252 138 94

Earnings per commonshare 0.54 0.47 2.18 1.86 1.60

Diluted earnings per commonshare 0.54 0.46 2.14 1.83 1.60

Cash flow fromoperating activities 66 37 243 131 88

Dividends declared 58 37 219 119 84

Dividends per commonshare 0.4665 0.4242 1.8660 1.5936 1.4035

Dividendpayout ratio 86.6% 90.2% 86.9% 86.7% 89.9%

Total assets1 4,338 2,740 2,850

Number of commonshares outstanding1 124,189,207 97,186,918 70,351,000

1 As at December 31, 2016, 2015 and 2014.

Cash distributions declared to holders of Fund Units increased significantly in 2016, comparedwith 2015 and 2014. The primary drivers for the increased distributions were additional Fund Unitsoutstanding as result of both the 2015 Transaction and the 2014 Transaction and the compoundingimpact of the increases in the monthly Fund Unit distribution in each of 2016, 2015 and 2014.

The Company’s distribution income and earnings for the year ended December 31, 2016 increasedsignificantly compared to the same period of 2015 given the increase in the monthly Fund Unitdistribution in January 2016 and further investment in the Fund. The Company, using proceeds fromits November 2015 and April 2016 common equity o�erings and Dividend Reinvestment and SharePurchase Plan (DRIP), invested in additional Fund Units. As a result, the Company’s ownershipin the Fund at December 31, 2016 increased to 56.9% from 50.8% as at December 31, 2015.

The Company incurs income taxes on distributions received from the Fund, the level of which willvary depending on the taxability of such distributions in any given year. To the extent that a portionof the distribution represents a tax-free intercorporate dividend or return of capital, cash tax will notbe incurred on a portion of the distribution. The Company recorded lower current income taxesexpense for the year ended December 31, 2016 as compared to 2015 and 2014 as a lesser portionof the distributions are taxable due to the 2015 Transaction.

The Company pays monthly dividends to its shareholders. Dividends for the year ended December 31, 2016were declared at an annual aggregate rate of $1.8660 per common share (2015 – $1.5936) representingtotal dividends of $219 million (2015 – $119 million) and an earnings payout ratio of 86.9% (2015 – 86.7%).

In January 2017, the Company announced a 10% increase in the monthly dividend to $0.1711 per commonshare, or $2.0532 per common share annualized, commencing with the January dividend.

The trends experienced for the three months ended December 31, 2016 compared with the same periodof 2015 are consistent with those discussed above for the corresponding annual periods.


Forward-Looking Information

Forward-looking information, or forward-looking statements,have been included in this MD&A to provide information about theCompany and the Fund Group, including management’s assessmentof the Company and the Fund Group’s future plans and operations.This information may not be appropriate for other purposes.Forward-looking statements are typically identified by words suchas “anticipate”, “expect”, “project”, “estimate”, “forecast”, “plan”,“intend”, “target”, “believe”, “likely” and similar words suggestingfuture outcomes or statements regarding an outlook. Forward-lookinginformation or statements included or incorporated by referencein this document include, but are not limited to, statements withrespect to the following: earnings/(loss) or adjusted earnings/(loss);earnings/(loss) or adjusted earnings/(loss) per share; cash flows;dividends or distributions; distributions to the Company by the Fund;dividend payout expectation; working capital requirements; flexibilityof distributions; organic growth opportunities; use of retained cash;and investment opportunities.

Although the Company believes these forward-looking statementsare reasonable based on the information available on the date suchstatements are made and processes used to prepare the information,such statements are not guarantees of future performance and readersare cautioned against placing undue reliance on forward-lookingstatements. By their nature, these statements involve a varietyof assumptions, known and unknown risks and uncertainties andother factors, which may cause actual results, levels of activity andachievements to di�er materially from those expressed or implied bysuch statements. Material assumptions include assumptions aboutthe following: supply, demand and prices for crude oil, natural gas,natural gas liquids (NGL) and renewable energy; exchange rates;inflation; interest rates; availability and price of labour and constructionmaterials; operational reliability; customer and regulatory approvals;maintenance of support and regulatory approvals for the Fund Group’sprojects; in-service dates; weather; the impact of the dividend policyon the Company’s or the Fund Group’s future cash flows; the FundGroup’s credit ratings; capital project funding; earnings/(loss)or adjusted earnings/(loss); earnings/(loss) per share; cash flows;and dividends or distributions. Assumptions regarding the supplyof and demand for crude oil, natural gas, NGL and renewable energy,and the prices of these commodities, are material to and underlie all

forward-looking statements. These factors are relevant to all forward-looking statements as they may impact current and future levelsof demand for the Fund Group’s services. Similarly, exchange rates,inflation and interest rates impact the economies and businessenvironments in which the Company and the Fund Group operateand may impact levels of demand for the Fund Group’s servicesand cost of inputs, and are therefore inherent in all forward-lookingstatements. Due to the interdependencies and correlation ofthese macroeconomic factors, the impact of any one assumptionon a forward-looking statement cannot be determined with certainty,particularly with respect to earnings/(loss), adjusted earnings/(loss)and associated per share amounts, or future dividends or distributions.The most relevant assumptions associated with forward-lookingstatements on projects under construction, including completiondates and capital expenditures, include the following: the availabilityand price of labour and construction materials; the e�ectsof inflation and foreign exchange rates on labour and materialcosts; the e�ects of interest rates on borrowing costs; the impactof weather; and customer and regulatory approvals on constructionand in-service schedules.

The Company’s and the Fund Group’s forward-looking statements aresubject to risks and uncertainties pertaining to operating performance,regulatory parameters, project approval and support, renewals ofrights of way, weather, economic and competitive conditions, publicopinion, changes in tax laws and tax rates, exchange rates, interestrates, commodity prices and supply of and demand for commodities,including but not limited to those risks and uncertainties discussedin this MD&A and in the Company’s and the Fund Group’s otherfilings with Canadian securities regulators. The impact of any onerisk, uncertainty or factor on a particular forward-looking statementis not determinable with certainty as these are interdependent andthe Company’s or the Fund Group’s future course of action dependson management’s assessment of all information available atthe relevant time. Except to the extent required by applicable law,the Company and the Fund Group assume no obligation to publiclyupdate or revise any forward-looking statements made in this MD&Aor otherwise, whether as a result of new information, future eventsor otherwise. All subsequent forward-looking statements, whetherwritten or oral, attributable to the Company or the Fund Groupor persons acting on the Company’s or the Fund Group’s behalf, areexpressly qualified in their entirety by these cautionary statements.


Fund Group Objectives and StrategyThe Fund Group’s objectives are to provide a predictable flow ofdistributable cash and to increase, where prudent, cash distributionsthrough investment in and ongoing management of low risk energyinfrastructure assets. The Fund Group’s objectives and strategiesare also aligned to support the corporate vision and strategiesof its sponsor, Enbridge.

In order to achieve these objectives, the Manager relies onthe following strategic priorities:

• Commitment to Safety and Operational Reliability;

• Strengthen Core Businesses;

• Focus on Project Management; and

• Preserve Financing Strength and Flexibility.

The Fund Group is closely focused on safety, system performanceand operating e�ectiveness. The commitment to safety andoperational reliability means achieving and maintaining industryleadership in safety (process, public and personal) and ensuring theoperational reliability and integrity of the systems the Fund Groupoperates in order to generate, transport and deliver the energysociety counts on while protecting the environment.

Within the Fund Group’s Liquids Pipelines assets, strategiesto strengthen the core business are focused on optimizing assetperformance, strengthening stakeholder and customer relationshipsand providing access to new markets for production from westernCanada, all while ensuring safe and reliable operations. The FundGroup’s assets are strategically located and well-positionedto capitalize on opportunities. In 2016, despite unfavourablecommodity market conditions, the Canadian Mainline deliveredrecord volumes of crude, driven by strong supply and refinerydemand in combination with e�orts to maximize capacity andthroughput as well as enhanced scheduling e�ciency with shippers.

The Liquids Pipelines business that the Fund Group acquiredin the 2015 Transaction is expected to have future organic growthopportunities beyond the current inventory of secured projects.The Fund Group will have a first right to execute any suchprojects that fall within the footprint of the Canadian LiquidsPipelines business.

Within the Gas Pipelines assets, the Fund Group seeks to optimizethe competitive advantage of its existing asset footprint, as theAlliance Pipeline is well-positioned to provide liquids-rich gastransportation services to developing regions in northeastern BritishColumbia, northwestern Alberta and the Bakken. In 2015, AlliancePipeline successfully re-contracted its firm capacity with shippers

under its new services framework that came into e�ectin December 2015. Long-term contracts have been securedthrough staged and non-staged receipt or full path services withan average contract length of approximately five years. In 2016,Alliance Pipeline benefitted from strong demand for seasonalfirm services through its open season process.

Within the Green Power assets, strategies are driven bythe objective to manage and maintain facilities in such a wayas to maximize power generation and related revenues when therelevant wind, solar or waste heat energy resource is available.

The Manager will continue to assess ways to generate value forthe Fund Group, including reviewing opportunities that may leadto acquisitions or other strategic transactions, some of which maybe material and may involve Enbridge. Opportunities are screened,analyzed and assessed using strict operating, strategic andfinancial criteria with the objective of ensuring the e�ectivedeployment of capital and the enduring financial strength andstability of the Fund Group.

Preservation of financial flexibility will continue to be a strategicpriority. Ongoing access to cost e�ective sources of debt and equitycapital is critical to the successful execution of the Fund Group’sstrategy to expand existing assets and acquire or develop newenergy infrastructure.

Liquidity and Capital ResourcesThe Company pays out a high proportion of distributions receivedfrom the Fund. Retained cash is expected to be used for futureincome tax payments and as a reserve to sustain a predictablestream of dividends to shareholders over the long term. Cash notrequired to fund dividends or to meet working capital requirementsis advanced to a subsidiary corporation of EIPLP pursuantto a subordinated demand loan with an interest rate of 4.25%per annum. At December 31, 2016, $78 million (2015 – $48 million)was outstanding to the Company.

The Company’s working capital requirements are not expectedto be significant in 2017. The Company has an agreement with ECTwhereby ECT reimburses the Company for all expenses incurredrelating to the normal course administration of the Companyas a publicly traded corporation.

The Company did not have any outstanding long-term debtas at December 31, 2016 and 2015.

Additional capital resources to finance the Company’s futureinvestment in the Fund are expected to be available throughaccess to equity markets, subject to the Company’s abilityto access the market on favourable terms.


Sources and Uses of Cash

Year endedDecember 31, 2016 2015

(millions of Canadian dollars)

Operating activities 243 131

Financing activities 554 761

Investing activities (797) (892)

Increase in cash and cash equivalents – –

Operating Activities

• Cash flows provided by operating activities reflect distributions received from the Fund,net of income taxes and changes in operating assets and liabilities.

Financing Activities

• The decrease in cash provided by financing activities in 2016 compared with 2015 reflectsthe smaller share issuance by the Company in April 2016 with proceeds of $718 million ascompared to the Company’s November 2015 share issuance with proceeds of $874 million.

• The decrease in cash provided by financing activities was also due to an increase in dividendspaid in 2016 compared with 2015 primarily due to the increased number of shares outstandingcombined with a higher monthly dividend rate in 2016 compared with 2015.

• The Company declared dividends of $1.8660 per common share in 2016 or $219 millionin aggregate (2015 – $1.5936 per common share or $119 million in aggregate).

• The Company’s shareholders are able to participate in the DRIP, which enables the participantsto reinvest their dividends in common shares of the Company at a 2% discount to market price.

• For the year ended December 31, 2016, the Company retained $49 million (2015 – $1 million)of cash in respect of reinvested dividends, representing an average participation rate of 22.4%(2015 – 5.1%) in the DRIP.

Investing Activities

• Proceeds of $718 million from the Company’s common share issuance in April 2016 wereused to subscribe for 25.4 million Fund Units.

• Proceeds of $49 million from the Company’s common share issuances under the DRIPfor the year ended December 31, 2016 were used to subscribe for 1.6 million Fund Units.

• Also included in investing activities are advances to and repayments from a subsidiarycorporation of EIPLP pursuant to a subordinated demand loan. These activities areconsidered related party transactions.

Related Party TransactionsIn 2016, the Company advanced $30 million, net of repayments (2015 – $17 million) to a subsidiarycorporation of EIPLP pursuant to a subordinated demand loan. At December 31, 2016, $78 million(2015 – $48 million) was outstanding on the loan. Interest on the demand loan was charged at 4.25%per annum. Interest income earned on the loan was $2 million (2015 – $2 million) for the year endedDecember 31, 2016 and accounts receivable were minimal as at December 31, 2016 and 2015.

In connection with the Company’s April 2016 public o�ering of 20.4 million common shares,the Fund reimbursed the Company for share issue costs of $24 million pursuant to a paymentassistance agreement. Proceeds from the equity o�ering were used by the Company to purchaseadditional Fund Units.

In connection with the Company’s November 2015 public o�ering of 21.5 million common shares,the Fund reimbursed the Company for share issue costs of $28 million pursuant to a paymentassistance agreement. Proceeds from the equity o�ering were used by the Company to purchaseadditional Fund Units.


Amounts due to a�liate relating to the Fund at December 31, 2016were nil. At December 31, 2015, amounts due to a�liate relating tothe Fund were $2 million related to corporate costs paid by the Fundand Fund Units issued in December 2015.

The Company has an agreement with ECT whereby ECT reimbursesthe Company for certain corporate costs. ECT reimbursed theCompany $1 million (2015 – $1 million) for corporate costs incurredin 2016. At December 31, 2016 and 2015, accounts receivable fromECT were nil.

The Company has an agreement with EMSI to provide managementand administrative services to the Company. Provided that the Fundis paying a base fee to EMSI for the services received by the Fund,no fee is payable to EMSI by the Company, as was the case forthe years ended December 31, 2016 and 2015.

Risk Management andFinancial InstrumentsThe Company pays out a high proportion of cash in the form ofdividends to investors, while maintaining a reliable and low-riskbusiness model. The Fund Group actively manages both financialand non-financial risks it is exposed to. The Fund Group performsan annual corporate risk assessment to identify all potential risks.Risks are ranked based on severity and likelihood both before andafter mitigating actions. In addition, the Fund Group has adopted aCash Flow at Risk (CFAR) policy to manage exposure to movementsin interest rates, foreign exchange rates and commodity prices.CFAR is a statistically derived measurement that quantifies themaximum adverse impact on cash flows over a specified periodof time within a pre-defined level of statistical confidence. The FundGroup’s CFAR limit has been set at 2.5% of forward annual availablecash flows from operations of the Fund Group.

Market Price Risk

The Company’s other comprehensive income (OCI) is subjectto market price risk resulting from changes in the fair value ofthe Company’s investment in the Fund, which is referenced to theCompany’s common share price. The Company does not typicallymanage this risk. A $1.00 increase or decrease in the Company’scommon share price at December 31, 2016 would have resulted inan increase or decrease in OCI, before income taxes of $124 millionand $107 million after income taxes (2015 – $97 million and$84 million, respectively) due to the revaluation of the investment.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meetits financial obligations as they become due. Accounts payable andaccrued liabilities and dividends payable are due within one month.In order to manage this risk, the Company forecasts its cash flowover the near and long term and ensures that su�cient fundswill be available when required. The Company’s primary sourceof liquidity is cash distributions it receives from its investmentin the Fund. Additional liquidity, if necessary, is expected to beavailable through collection of amounts advanced to a subsidiarycorporation of EIPLP pursuant to a subordinated demand loan.

The future level of distributions received from the Fund may varydepending on, but not limited to, the performance of the Fund’sbusiness through its indirect investment in EIPLP, the level of continuedinvestment or the Fund Group’s ability to obtain financing. Furtherfactors which may impact the Fund’s ability to sustain distributionsinclude future demand for the services provided by the Fund Group’sbusinesses and the Fund’s ability to comply with covenants in itsdebt agreements and repay or refinance its debt as it comes due.

The Company oversees its investment in the Fund through itsDirectors, who are also ECT Trustees. The ECT Board of Trusteesprovides oversight of the Fund Group and the operation andstrategies of the entities that generate cash for distributionto the Company and Enbridge.

Credit Risk

Credit risk arises from the possibility that a counterparty may defaulton its contractual obligations to the Company. Demand loan due froma�liate, Accounts receivable and other and Distributions receivableare subject to credit risk, the maximum exposure of which is thecarrying value as presented on the Statements of Financial Position.The Company’s credit risk is mitigated as the majority of its financialassets are with a�liates.

Fair Value of Financial Instruments

At December 31, 2016 and 2015, the Company’s financial instrumentswere comprised of the Company’s investment in the Fund, Demandloan due from a�liate, Accounts receivable and other, Distributionsreceivable, Accounts payable and other and Dividends payable.The fair value of the Company’s investment in the Fund is basedon the quoted market price of the Company’s common sharesadjusted for assets and liabilities of the Company which are notapplicable to the Fund. The fair value of Demand loan due froma�liate, Accounts receivable and other, Distributions receivable,Accounts payable and other and Dividends payable approximatestheir carrying values due to their short-term maturities.

Business Risks

Readers are referred to the “Risk Management and FinancialInstruments” disclosure in the Fund’s MD&A and EIPLP’s MD&Aas well as “Risk Factors” in the Company’s AIF and the Fund’s AIF.

The following are certain risk factors relating to the activitiesof the Company and ownership of ENF common shares.

Future Dividends

Dividends declared on the common shares will be wholly-dependenton the declaration of distributions by the Fund. Future dividendpayments by the Company and the level thereof are uncertainas the Company’s dividend practices and the funds available forthe payment of dividends from time to time will be dependent upon,among other things, operating cash flow generated by investeesof the Fund and their respective operations and investments,financial requirements for the Fund and its investees’ operationsand the Fund’s ability to execute its growth strategy.


Pre-emptive Right

Pursuant to pre-emptive rights contained in the Fund Trust Indenture,the Company and Enbridge are entitled to acquire any Fund Unitsproposed to be issued by the Fund in proportion to their respectiveeconomic interest in the Fund. If the Company fails to fully subscribefor its proportionate economic interest, its holdings in the Fund maybe diluted.

Restriction in Business Activities

The Company’s business is restricted to investment in the Fund.Therefore, the Company’s financial results are dependenton the Fund. The inability of the Fund to manage its businessand investments e�ectively could have a material adverse impacton the Company’s operations and prospects. Further, the level ofthe consolidated indebtedness of the Fund and its investees fromtime to time could impair the Company’s ability to obtain additionalfinancing on a timely basis to take advantage of permitted businessopportunities that may arise.

Availability of Financing

If the Company pays out a high proportion of the distributionsreceived from the Fund to shareholders by way of dividend, it mayhave to enter into financings or other transactions involving theissuance of securities by the Company in order to obtain fundsfor business purposes. An inability to raise new equity capital maylimit the Company’s ability to grow and execute its business plan.The issuance of equity securities may also be dilutive to shareholders.

Future Accounting PoliciesFinancial Instruments

IFRS 9 (2014), Financial Instruments, addresses classificationand measurement of financial assets. IFRS 9 (2014) replacesthe model for measuring equity instruments and generally requiresthe recognition of a financial instrument’s fair value through earnings,except in limited circumstances. This standard is e�ective foraccounting periods beginning on or after January 1, 2018 with earlyadoption permitted, and is generally applied on a retrospective basis.The Company is currently assessing the impact of the new standardon its financial statements.

Critical Accounting EstimatesLong-Term Investment

The Company holds an investment in the Fund, representing 56.9%(2015 – 50.8%) of the outstanding Fund Units as at December 31, 2016.The Company accounts for its investment as an available-for-salefinancial asset. Management concluded that the Company does notcontrol the Fund, but rather that Enbridge, through the combinationof direct and indirect equity interests, investment in preferred unitsof ECT (ECT Preferred Units) and its role as manager of the Fund,is the primary beneficiary of the Fund. Significant estimates arealso required in determining the fair value and recoverability of theinvestment. The fair value of the investment is estimated by relyingon the quoted market price of the Company’s common sharesadjusting for other assets and liabilities not attributable to theFund and significant or prolonged declines in fair value below costare assessed for evidence of impairment.

Controls and ProceduresDisclosure Controls and Procedures

Disclosure controls and procedures are designed to providereasonable assurance that information required to be disclosedin reports filed with, or submitted to, securities regulatory authoritiesis recorded, processed, summarized and reported within thetime periods specified under Canadian securities law. Based onthe requirements of National Instrument 52-109 Certification ofDisclosure in Issuers’ Annual and Interim Filings (NI 52-109), EMSIevaluated the e�ectiveness of the Company’s disclosure controlsand procedures (as defined in NI 52-109) and concluded thatthe Company’s disclosure controls and procedures were e�ectiveas at December 31, 2016.

Management’s Report on Internal Controls OverFinancial Reporting

The Manager is responsible for establishing and maintainingadequate internal control over financial reporting as such termis defined in the rules of the Canadian Securities Administrators.The Company’s internal control over financial reporting is a processdesigned, under the supervision and with the participationof executive and financial o�cers of the Manager, to providereasonable assurance regarding the reliability of financial reportingand the preparation of the Company’s financial statementsfor external reporting purposes in accordance with IFRS.

The Company’s internal controls over financial reporting includepolicies and procedures that:

• pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect transactions and dispositionsof assets of the Company;

• provide reasonable assurance that transactions are recordedas necessary to permit preparation of financial statementsin accordance with IFRS; and

• provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition, use or dispositionof the Company’s assets that could have a material e�ecton the financial statements.

The Company’s internal control over financial reporting may notprevent or detect all misstatements because of inherent limitations.Additionally, projections of any evaluation of e�ectiveness to futureperiods are subject to the risk that controls may become inadequatebecause of changes in conditions or deterioration in the degreeof compliance with the Company’s policies and procedures.

EMSI assessed the e�ectiveness of the Company’s internal controlover financial reporting as at December 31, 2016, based on theframework established in Internal Control – Integrated Framework(2013) issued by the Committee of Sponsoring Organizations ofthe Treadway Commission. Based on this assessment, the Managerconcluded that the Company maintained e�ective internal controlover financial reporting as at December 31, 2016.


Selected Quarterly Financial Information2016 Q1 Q2 Q3 Q4 Total

(millions of Canadian dollars, except per share amounts)

Revenues 52 68 67 67 254

Earnings 52 67 66 67 252



Dividends declared per commonshare 0.4665 0.4665 0.4665 0.4665 1.8660

2015 Q1 Q2 Q3 Q4 Total


Revenues 34 34 33 42 143

Earnings 31 31 35 41 138



Dividends declared per commonshare 0.3855 0.3855 0.3984 0.4242 1.5936

Significant items that have impacted quarterly financial information are as follows:

• In April 2016, the Company subscribed for 25.4 million Fund Units with proceeds fromthe Company’s issuance of common shares to the public and Enbridge, which increased thetotal Fund Units owned by the Company to 122.9 million at that time. The incremental ownershipof the Fund Units increased the amount of distributions received on the Fund Units and, therefore,increased the Company’s revenues and earnings.

• The Company increased its dividend per common share by 10% to $0.1555 per month e�ectivewith the January 2016 dividend as a result of the anticipated growth in distributions from the Fundand decreased taxability of the distributions received from the Fund.

• In November 2015, the Company subscribed for 26.8 million Fund Units with proceeds fromthe Company’s issuance of common shares to the public and Enbridge, which increased the totalFund Units owned by the Company from 70.4 million to 97.2 million. The incremental ownershipof Fund Units increased the amount of distributions received on the Fund Units and, therefore,increased the Company’s revenues and earnings.

• The Company increased its dividend per common share by 10% to $0.1414 per month e�ectivewith the September 2015 dividend as a result of the anticipated growth in distributions fromthe Fund and decreased taxability of the distributions received from the Fund in connectionwith the 2015 Transaction.

• Pursuant to agreements entered into by the Company in connection with the 2015 Transaction,the EIPLP Class C units, ECT Preferred Units and Fund Units held by Enbridge, directly andindirectly, may be exchanged into ENF common shares, subject to certain restrictions, creatingpotential dilution of the Company’s earnings per common share.

Outstanding Share DataAs at February 6, 2017, 124,320,723 common shares and one special voting share of the Company wereissued and outstanding.


Management’s ReportTo the Shareholders of Enbridge Income Fund Holdings Inc. (ENF)Financial Reporting

The management of Enbridge Management Services Inc. is responsible for the accompanying financialstatements and all related financial information contained in the annual report, including Management’sDiscussion and Analysis. The financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRS) and necessarily include amounts that reflect management’sjudgment and best estimates.

The Board of Directors (the Board) and the Audit Committee are responsible for all aspects relatedto governance of ENF. The Audit Committee, composed of independent and financially literate directors,has a specific responsibility to oversee management’s e�orts to fulfill its responsibilities for financialreporting and internal controls related thereto. The Audit Committee meets with management, internalauditors and independent auditors to review the financial statements and the internal controls as theyrelate to financial reporting. The Audit Committee reports its findings to the Board for its considerationin approving the financial statements for issuance to the shareholders. The internal auditors andindependent auditors have unrestricted access to the Audit Committee.

Internal Control Over Financial Reporting

Management is also responsible for establishing and maintaining adequate internal control overfinancial reporting. ENF’s internal control over financial reporting includes policies and proceduresto facilitate the preparation of relevant, reliable and timely information, to prepare financial statementsfor external reporting purposes in accordance with IFRS and provide reasonable assurance that assetsare safeguarded.

PricewaterhouseCoopers LLP, independent auditors appointed by the shareholders of ENF, haveconducted an audit of the financial statements of ENF in accordance with Canadian generallyaccepted auditing standards and have issued an unqualified audit report, which is accompanyingthe financial statements.

Perry F. Schuldhaus Wanda M. OpheimPresident Chief Financial O�cer

February 17, 2017

Financial Statements 19

Independent Auditor’s ReportTo the Shareholders of Enbridge Income Fund Holdings Inc.We have audited the accompanying financial statements of Enbridge Income Fund Holdings Inc.,which comprise the statements of financial position as at December 31, 2016 and December 31, 2015and the statements of comprehensive income (loss), changes in shareholders’ equity and cash flowsfor the years then ended and the related notes, which comprise a summary of significant accountingpolicies and other explanatory information.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statementsin accordance with International Financial Reporting Standards, and for such internal controlas management determines is necessary to enable the preparation of financial statements thatare free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audits.We conducted our audits in accordance with Canadian generally accepted auditing standards.Those standards require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the financial statements, whether due to fraudor error. In making those risk assessments, the auditor considers internal control relevant to the entity’spreparation and fair presentation of the financial statements in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on thee�ectiveness of the entity’s internal control. An audit also includes evaluating the appropriatenessof accounting policies used and the reasonableness of accounting estimates made by management,as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained in our audits is su�cient and appropriateto provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial positionof Enbridge Income Fund Holdings Inc. as at December 31, 2016 and December 31, 2015 and its financialperformance and its cash flows for the years then ended in accordance with International FinancialReporting Standards.

Chartered Professional AccountantsCalgary, Alberta

February 17, 2017


Statements of Comprehensive Income (Loss)Year endedDecember 31, 2016 2015


Distribution andother income (Notes 4 and 10) 254 143

Income taxes expense (Note 6) (2) (5)

Earnings 252 138

Other comprehensive income/(loss)

Unrealized fair value change in available-for-sale investment (Note 4) 793 (1,008)

Deferred income taxes recovery/(expense) (Note 6) (107) 123

Other comprehensive income/(loss) 686 (885)

Comprehensive income/(loss) 938 (747)

Earnings per commonshare (Note 5) 2.18 1.86

Diluted earnings per commonshare (Note 5) 2.14 1.83

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


Statements of Changes in Shareholders’ EquityYear endedDecember 31, 2016 2015


Share capital

Commonshares (Note 5)

Balance at beginning of year 2,217 1,342

Share issuance 718 874

Dividend reinvestment and share purchaseplan 49 1

2,984 2,217

Special voting share (Note 5) – –

Balance at endof year 2,984 2,217

Share premium (Note 5) 192 192

Retained earnings

Balance at beginning of year 49 30

Earnings 252 138

Commonshare dividends declared (219) (119)

Balance at endof year 82 49

Accumulated other comprehensive income

Balance at beginning of year 229 1,114

Other comprehensive income/(loss) 686 (885)

Balance at endof year 915 229

Total shareholders’ equity 4,173 2,687


.


Statements of Cash FlowsYear endedDecember 31, 2016 2015


Operating activities

Earnings 252 138

Changes in operating assets and liabilities (9) (7)

243 131

Financing activities

Share issuances (Note 5) 718 874

Commonshare dividends (164) (113)

554 761

Investing activities

Purchaseof Enbridge IncomeFund trust units (Note 4) (767) (875)

Demand loan advances to a�liate (Note 10) (74) (21)

Demand loan repayments froma�liate (Note 10) 44 4

(797) (892)

Change in cash andcash equivalents – –

Cash and cash equivalents at beginning of year – –

Cash and cash equivalents at endof year – –

Supplementary cash flow information

Income taxes paid 3 8



Statements of Financial PositionDecember 31, 2016 2015


Assets

Current assets

Accounts receivable andother 1 1

Demand loandue froma�liate (Note 10) 78 48

Income taxes receivable 2 1

Distributions receivable 22 15

103 65

Investment in Enbridge IncomeFund (Notes 4 and 8) 4,235 2,675

4,338 2,740

Liabilities and shareholders’ equity

Current liabilities

Accounts payable andother 1 –

Due to a�liates (Note 10) – 2

Dividends payable 20 14

21 16

Deferred income taxes 144 37

165 53

Shareholders’ equity

Share capital (Note 5) 2,984 2,217

Share premium (Note 5) 192 192

Retained earnings 82 49

Accumulated other comprehensive income 915 229

4,173 2,687

4,338 2,740


Approved by the Board of Directors:

Bruce G. Waterman E.F.H. RobertsDirector Director


Notes to the Financial Statements1. General Business DescriptionEnbridge Income Fund Holdings Inc. (the Company) is a publiclytraded corporation, incorporated on March 26, 2010 under thelaws of the Province of Alberta. The Company’s common sharescommenced trading on the Toronto Stock Exchange on December21, 2010. The Company holds an investment in Enbridge Income Fund(the Fund), which is an unincorporated open-ended trust establishedby a trust indenture under the laws of the Province of Alberta.The Company’s registered o�ce is 200, 425 – 1st Street SW, Calgary,Alberta, Canada.

The business of the Company is limited to its investment in theFund. The Fund, through its indirect investment in Enbridge IncomePartners LP (EIPLP), is involved in the transportation, storage andgeneration of energy. EIPLP owns interests in liquids transportationand storage assets, including the Canadian Mainline, the RegionalOil Sands System, a 50% interest in the Canadian and United Statesportions of the Alliance Pipeline, which transports natural gas, andinterests in renewable and alternative power generation assets.

2. Basis of PreparationThe Company prepares its financial statements in accordancewith International Financial Reporting Standards (IFRS) as issuedby the International Accounting Standards Board.

Amounts are stated in Canadian dollars, the Company’s functionaland presentation currency, unless otherwise indicated.

The Company has consistently applied the same accounting policiesthroughout all periods presented, as if these policies had alwaysbeen in e�ect.

These financial statements were authorized for issuance onFebruary 17, 2017 by the Company’s Board of Directors (the Board).

3. Summary of SignificantAccounting PoliciesBasis of Measurement

These financial statements have been prepared under the historicalcost convention except for the revaluation of available-for-salefinancial assets to fair value.

Cash and Cash Equivalents

Cash and cash equivalents include short-term investments withan initial term to maturity of three months or less when purchased.

Financial Instruments

The Company classifies financial assets and liabilities as held fortrading, available-for-sale, loans or receivables and financial liabilitiesat amortized cost. All financial instruments are initially recordedat fair value on the statements of financial position. Subsequentmeasurement of the financial instrument is based on its classification.

Available-for-Sale

Available-for-sale financial assets are non-derivatives that arenot classified in any of the other categories. The Company’savailable-for-sale asset is comprised of an investment in the Fund.Available-for-sale financial assets are recognized initially at fairvalue plus transaction costs and subsequently carried at fair value.Gains and losses arising from changes in fair value are recognizedin Other comprehensive income/(loss) (OCI). Distributions fromavailable-for-sale instruments are recognized in earnings whenthe Company’s right to receive payment is established.

The Company accounts for its investment in trust units of theFund as an available-for-sale financial asset due to the redeemablenature of the Fund’s trust units. The redemption feature permitsholders to redeem trust units for cash, subject to certain limitations.Further, the Company does not consolidate its investment in the Fundas its investment does not confer control. Enbridge Inc. (Enbridge)is the controlling party for accounting purposes through thecombination of its direct and indirect equity interests and preferredunit investment in Enbridge Commercial Trust (ECT), a subsidiary ofthe Fund, as well as through Enbridge’s role as manager of the Fund.

Loans and Receivables

Loans and receivables, which include Accounts receivable andother, Demand loan due from a�liate and Distributions receivable,are measured at amortized cost, using the e�ective interest ratemethod, net of any impairment losses recognized.

Financial Liabilities at Amortized Cost

Other financial liabilities are recorded at amortized cost usingthe e�ective interest rate method and include Accounts payableand other and Dividends payable.

Impairment

With respect to loans and receivables, the Company assesses theassets for impairment when it no longer has reasonable assuranceof timely collection. If evidence of impairment is noted, the Companyreduces the value of the loan or receivable to its estimated realizableamount, determined using discounted expected future cash flows.

For available-for-sale financial assets, the Company assesses atthe end of each reporting period whether there is objective evidencethat a financial asset is impaired. In the case of investments classifiedas available-for-sale, a significant or prolonged decline in the fairvalue of the security below its cost is evidence that the assetis impaired. If any such evidence of impairment exists, the cumulativeloss, measured as the di�erence between the acquisition costand the current fair value, less any impairment loss on that financialasset previously recognized in earnings, is removed from OCI andrecognized in earnings. Impairment losses on available-for-saleequity instruments are not reversed.

Notes to the Financial Statements 25

Income Taxes

The liability method of accounting for income taxes is followed. Deferred income tax assets and liabilitiesare recorded based on temporary di�erences between the tax bases of assets and liabilities and theircarrying values for accounting purposes. Deferred income tax assets and liabilities are measured usingthe tax rate that is expected to apply when the temporary di�erences reverse.

Earnings Per Share

Basic earnings per share is calculated by dividing earnings for the year by the weighted average numberof common shares outstanding during the year.

Diluted earnings per share is calculated by adjusting the weighted average number of shares outstandingfor the potential number of shares which may have a dilutive e�ect on earnings. The weighted averagenumber of diluted shares is calculated based on the exchange rights of securities issued by the Fund,ECT and EIPLP (Note 5).

Dividends

Dividends on common shares are recognized in the Company’s financial statements in the periodin which the dividends are declared by the Board.

Accounting Estimates

The preparation of financial statements in conformity with IFRS requires management to makeestimates and assumptions that a�ect the reported amounts of assets, liabilities, revenues and expenses,as well as the disclosure of contingent assets and liabilities in the financial statements. Significantestimates and assumptions used in preparation of the financial statements include, but are not limited to:the fair value of available-for-sale financial asset (Note 8). Actual results could di�er from these estimates.

Future Accounting Policy Changes

Financial Instruments

IFRS 9 (2014), Financial Instruments, addresses classification and measurement of financial assets.IFRS 9 (2014) replaces the model for measuring equity instruments and generally requires therecognition of a financial instrument’s fair value through earnings, except in limited circumstances.This standard is e�ective for accounting periods beginning on or after January 1, 2018 with earlyadoption permitted, and is generally applied on a retrospective basis. The Company is currentlyassessing the impact of the new standard on its financial statements.

4. Investment in Enbridge Income FundAs at December 31, 2016, the Company owned 124.2 million units (2015 – 97.2 million), or 56.9%(2015 – 50.8%), of the Fund’s issued and outstanding ordinary trust units (Fund Units). During theyear ended December 31, 2016, the Company used the proceeds from its public o�ering and thecash retained and invested under its Dividend Reinvestment and Share Purchase Plan (DRIP) (Note 5)

to purchase 27.0 million Fund Units (2015 – 26.8 million).



Balance at beginning of year 2,675 2,808

Investment acquired 767 875

Fair value change for the year 793 (1,008)

Balance at endof year 4,235 2,675

On September 1, 2015, EIPLP acquired 100% interests in entities holding certain Canadian liquidspipelines, storage and renewable energy assets from Enbridge and certain of its subsidiaries foraggregate consideration of $30.4 billion plus incentive distribution and performance rights andworking capital adjustments (the 2015 Transaction).

The Fund issued Fund Units as part of the consideration for the 2015 Transaction. As the Companydid not participate in the Fund Unit issuance in September 2015, the Company’s ownership of theFund’s issued and outstanding Fund Units decreased from 88.1% at December 31, 2014 to 42.8%at September 30, 2015.


Distribution Income

The Fund declared distributions on a monthly basis of $0.1792 (2015 – $0.1574) per unit during the yearended December 31, 2016 or $252 million (2015 – $141 million) in aggregate to the Company.

Summarized Financial Information1

Summarized financial information of the Fund which supports the Company’s earnings, derived fromthe Fund’s financial statements prepared in accordance with generally accepted accounting principlesin the United States of America (U.S. GAAP), was as follows:



Revenues2 – 298

Income fromequity investments2 747 115

Earnings2 648 120

Other comprehensive loss2 (74) (76)

Total comprehensive income2 574 44

Current assets3 725 545

Non-current assets3 2,521 2,083

Current liabilities3 458 423

Non-current liabilities3 2,100 2,218

1 Summarized financial information of the Fund is prepared in accordance with U.S. GAAP. As such the results may have been di�erent had they been prepared inaccordance with IFRS.

2 The 2015 Transaction resulted in changes to the Fund’s method of accounting for its investments in ECT and EIPLP. The Fund ceased to consolidate ECT and EIPLP, ECTprospectively applied the equity method to account for its investment in EIPLP and the Fund prospectively applied the equity method to account for its investment in ECT.

3 As at December 31, 2016 and 2015.

5. Share Capital and Share PremiumAuthorized

The authorized share capital of the Company consists of an unlimited number of common shares,first preferred shares issuable in series limited to one half of the number of common shares issuedand outstanding at the relevant time and one special voting share.

Issued and Outstanding

2016 2015

Year endedDecember 31,Number

of Shares AmountNumber

of Shares Amount

(millions of Canadian dollars; number of shares in millions)

Commonshares

Balance at beginning of year 97 2,217 70 1,342

Share issuance 25 718 27 874

DRIP 2 49 – 1

Balance at endof year1 124 2,984 97 2,217

Special voting share1 – – – –

Balance at endof year 124 2,984 97 2,217

1 Enbridge owns 24.7 million (2015 – 19.3 million) common shares and one (2015 – one) special voting share.


Plan of Arrangement

Pursuant to a plan of arrangement to restructure the Fund (the Plan),20.1 million Fund Units held by public unitholders, together with5.0 million Fund Units held by Enbridge, were exchanged for25.1 million common shares of the Company on December 17, 2010.

The initial stated capital of the Company for purposes of theBusiness Corporations Act (Alberta) was established to be $251 million,as determined at the discretion of the Board. The residual amountof $192 million by which the fair value of the consideration receivedexceeded the stated capital was assigned to Share Premium.The Board may elect in the future to reinstate Share Premiumto stated capital under certain circumstances.

Common Shares

Each common share represents an equal undivided beneficialinterest in the net assets in the event of termination or wind-upof the Company. Holders of common shares are entitled to onevote per share at meetings of the Company’s shareholders.

Dividends

The Company declared monthly dividends of $0.1555 per sharefor each month during the year ended December 31, 2016, whichwere paid in the following month. The Company declared monthlydividends of $0.1285 per share for the months of January toAugust 2015 and $0.1414 per share for the months of Septemberto December 2015, which were paid in the following month.

On January 5, 2017, the Company announced a monthly dividendof $0.1711 per common share to be paid on February 15, 2017to shareholders of record on January 31, 2017. On February 17, 2017,the Company announced a monthly dividend of $0.1711 per commonshare to be paid on March 15, 2017 to shareholders of recordon February 28, 2017.

Dividend Reinvestment and Share Purchase Plan

The Company’s shareholders are able to participate in the DRIP.The DRIP enables participants to reinvest their dividends in commonshares of the Company at a 2% discount to market price andto make additional optional cash payments to purchase commonshares at the market price, free of brokerage or other charges.The issuance of common shares from treasury for dividendsreinvested pursuant to the DRIP enables the Company to retain cashwhich it in turn uses to purchase additional Fund Units. For the yearended December 31, 2016, the Company used $49 million of cashin respect of reinvested dividends and optional cash payments fromthe DRIP to purchase 1.6 million Fund Units.

Special Voting Share

Enbridge, the holder of the special voting share, is entitledto receive notice of and to attend all annual and special meetingsof shareholders and may elect one director to the Board for so longas it beneficially owns or controls, directly or indirectly, between 15%and 39% of the issued and outstanding common shares, providedthat if it elects to exercise its right to elect one director, it willnot exercise the votes attached to the portion of common sharesrepresenting its pro-rata representation on the Board in respectof the election of the remaining directors of the Company atmeetings of shareholders. The holder of the special voting sharewill not be entitled to receive, in respect of the special voting share,any dividends or to participate in any distribution of the propertyor assets of the Company upon the liquidation, dissolutionor winding-up of the Company. The special voting share mayonly be transferred or assigned to an a�liate of Enbridge.

Share Issuances

In April 2016, the Company completed a public equity o�eringof 20.4 million common shares at a price of $28.25 per share(the O�ering Price) for gross proceeds of $575 million. Concurrent withthe closing of the equity o�ering, Enbridge subscribed for 5.0 millioncommon shares at the O�ering Price, for gross proceeds of $143 million,on a private placement basis to maintain its 19.9% ownership interestin the Company. The Company used the proceeds from the commonshare issuances to subscribe for 25.4 million Fund Units.

In November 2015, the Company completed a public o�eringof 21.5 million common shares at a price of $32.60 per commonshare for gross proceeds of $700 million. Concurrently, Enbridgesubscribed for an additional 5.3 million common shares at a priceof $32.60 per common share for gross proceeds of $174 million.The Company used the aggregate gross proceeds of $874 millionto subscribe for 26.8 million Fund Units.

Earnings Per Common Share

Basic

Earnings per common share is calculated by dividing earningsby the weighted average number of common shares outstanding.

Diluted

In connection with the 2015 Transaction, securities were issuedby the Fund and EIPLP to Enbridge, which may be exchanged intocommon shares of the Company. In addition, the terms of existingFund Units and preferred units of ECT (ECT Preferred Units),held by Enbridge directly and indirectly, were amended to includeexchange rights into common shares of the Company. If thesecurities are exchanged into common shares of the Company,the Company would subscribe for the same number of additionalFund Units which would increase the Company’s distribution income.


Weighted average shares outstanding used to calculate basic and diluted earnings per share are as follows:

December 31, 2016 2015


Numerator

Earnings 252 138

Dilutive e�ect of exchangeable securities 1,333 393

Numerator for diluted earnings per share 1,585 531

Denominator (millions of shares)

Weighted average number of shares outstanding 116 74

Dilutive e�ect of exchangeable securities

FundUnits 94 38

ECTPreferredUnits 88 30

EIPLPClassCunits 443 148

Denominator for diluted earnings per share 741 290

Earnings per share

Basic 2.18 1.86

Diluted 2.14 1.83

Shareholders’ Rights Plan

The Shareholders’ Rights Plan is designed to ensure the fair treatment of shareholders in connection withany takeover o�er for the Company. Rights issued under the Shareholders’ Rights Plan become exercisablewhen a person and any related parties, acquires or announces its intention to acquire shares which combinedwith existing holdings would represent 20% or more of the Company’s outstanding common shares withoutcomplying with certain provisions set out in the Shareholders’ Rights Plan or without approval of the Board.Should such an acquisition occur, each rights holder other than the acquiring person and related partieswill have the right to purchase common shares of the Company at a discount to the market price at the time.

6. Income TaxesThe initial acquisition of Fund Units under the Plan did not constitute a business combination, nor did thetransaction a�ect earnings. As such, recognition of the resulting deferred income tax liability relating tothe estimated taxable temporary di�erence of $71 million which arose on initial recognition of the investmentin the Fund is not permitted.

At December 31, 2016 and 2015, deferred income taxes represented the di�erence in accounting and taxbases of the Investment in the Fund, less the deferred income tax liability not recognized on initial acquisitionof the investment on December 17, 2010.

Income taxes expense was comprised primarily of current income tax expense of $2 million for the yearended December 31, 2016 (2015 – $5 million).

OCI included $107 million of deferred income tax expense (2015 – $123 million recovery) for the year endedDecember 31, 2016, related to the change in the di�erence between the accounting and tax bases of theinvestment in the Fund.

E�ective July 1, 2015, the Alberta government enacted an increase to the provincial tax rate from 10% to 12%,resulting in deferred tax expense of $13 million included primarily in OCI for the year ended December 31, 2015.

Income Tax Rate Reconciliation



Earnings before income taxes 254 143

Combined statutory income tax rate 27.0% 26.0%

Income taxes at statutory income tax rate 69 37

Decrease resulting fromnon-taxable dividend (67) (32)

Income taxes expense 2 5

E�ective income tax rate 1.0% 3.4%


7. Risk ManagementMarket Price Risk

The Company’s OCI is subject to market price risk resultingfrom changes in the fair value of the Company’s investmentin the Fund, which is referenced to the Company’s commonshare price. The Company does not typically manage this risk.A $1.00 increase or decrease in the Company’s common shareprice at December 31, 2016 would have resulted in an increaseor decrease OCI, before income taxes of $124 million and$107 million after income taxes (2015 – $97 million and $84 million,respectively) due to the revaluation of the investment.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meetits financial obligations as they become due. Accounts payable andaccrued liabilities and dividends payable are due within one month.In order to manage this risk, the Company forecasts its cash flowover the near and long term and ensures that su�cient fundswill be available when required. The Company’s primary sourceof liquidity is cash distributions it receives from its investmentin the Fund. Additional liquidity, if necessary, is expected to beavailable through collection of amounts advanced to a subsidiarycorporation of EIPLP pursuant to a subordinated demand loan.

Credit Risk

Credit risk arises from the possibility that a counterparty maydefault on its contractual obligations to the Company. Demand loandue from a�liate, Accounts receivable and other and Distributionsreceivable are subject to credit risk, the maximum exposureof which is the carrying value as presented on the Statementsof Financial Position. The Company’s credit risk is mitigatedas the majority of its financial assets are with a�liates.

8. Fair Value of Financial InstrumentsThe fair value of financial instruments reflects the Company’s bestestimates of market value based on valuation techniques, supportedby observable market prices where available. The fair value ofloans and receivables and other financial liabilities approximatetheir carrying value due to the short period to maturity.

The Company categorizes those financial assets and liabilitiesmeasured at fair value into one of three di�erent levels dependingon the observability of the inputs employed in the measurement.

Level 1

Level 1 includes financial instruments measured at fair value basedon unadjusted quoted prices for identical assets and liabilitiesin active markets that are accessible at the measurement date.An active market for a financial instrument is considered to bea market where transactions occur with su�cient frequencyand volume to provide pricing information on an ongoing basis.The Company did not have any financial instruments categorizedas Level 1 as at December 31, 2016 or 2015.

Level 2

Level 2 includes financial instrument valuations determined usingdirectly or indirectly observable inputs other than quoted pricesincluded within Level 1. The fair value measurement of the investmentin the Fund is classified as Level 2, as the valuation techniquereferences the quoted market price of the Company’s commonshares, and adjusts for assets and liabilities not applicableto the Fund. At December 31, 2016, the Company’s investmentin the Fund had a fair value of $4.2 billion (2015 – $2.7 billion).

Level 3

Level 3 includes financial instrument valuations based on inputswhich are less observable, unavailable or where the observable datadoes not support a significant portion of the financial instruments’fair value. Generally, Level 3 financial instruments are longer datedtransactions, occur in less active markets, occur at locations wherepricing information is not available or have no binding broker quoteto support Level 2 classification. The Company did not have anyfinancial instruments categorized as Level 3 as at December 31, 2016or 2015.

The Company’s policy is to recognize transfers as of the last dayof the reporting period. There were no transfers between levelsas at December 31, 2016 and 2015.


9. Capital DisclosuresThe Company defines capital as shareholders’ equity less cashand cash equivalents. Capital totalled $4.2 billion (2015 – $2.7 billion)at December 31, 2016.

The Company’s objectives when managing capital are to provideliquidity for additional investment in the Fund and to generateadequate returns and predictable cash flow for distribution toshareholders in the form of dividends. New capital, if necessary,may be raised through the issuance of equity securities.

10. Related Party TransactionsIn 2016, the Company advanced $30 million, net of repayments(2015 – $17 million) to a subsidiary corporation of EIPLP pursuantto a subordinated demand loan. At December 31, 2016, $78 million(2015 – $48 million) was outstanding on the loan. Interest on thedemand loan was charged at 4.25% per annum. Interest incomeearned on the loan was $2 million (2015 – $2 million) for the yearended December 31, 2016 and accounts receivable were minimalas at December 31, 2016 and 2015.

In connection with the Company’s April 2016 public o�eringof 20.4 million common shares, the Fund reimbursed the Companyfor share issue costs of $24 million pursuant to a paymentassistance agreement. Proceeds from the equity o�eringwere used by the Company to purchase additional Fund Units.

In connection with the Company’s November 2015 publico�ering of 21.5 million common shares, the Fund reimbursedthe Company for share issue costs of $28 million pursuantto a payment assistance agreement. Proceeds from the equityo�ering were used by the Company to purchase additionalFund Units.

Amounts due to a�liate relating to the Fund at December 31, 2016were nil. At December 31, 2015, amounts due to a�liate relatingto the Fund were $2 million related to corporate costs paidby the Fund and Fund Units issued in December 2015.

The Company has an agreement with ECT whereby ECT reimbursesthe Company for certain corporate costs. ECT reimbursed theCompany $1 million (2015 – $1 million) for corporate costs incurredin 2016. At December 31, 2016 and 2015, accounts receivable fromECT were nil.

The Company is managed by Enbridge Management Services Inc.(EMSI), a wholly-owned subsidiary of Enbridge. EMSI servesas the manager of the Fund, ECT and EIPLP. The Company hasan agreement with EMSI to provide management and administrativeservices to the Company. Provided that the Fund is paying a basefee to EMSI for the services received by the Fund, no fee is payableto EMSI by the Company, as was the case for the years endedDecember 31, 2016 and 2015.


32 Overview

33 Enbridge Income Fund Performance Overview

35 Non-GAAP Measures

37 Fund Group Objectives and Strategy


39 Analysis of Cash Distributions Declared

40 Quarterly Financial Information



44 Changes in Accounting Policies

45 Fund Ownership

Financial Statements

46 Management’s Report


48 Statements of Earnings

49 Statements of Comprehensive Income

50 Statements of Changes in Unitholders’ Equity

51 Statements of Cash Flows

52 Statements of Financial Position

Notes to the Financial Statements



58 3. Changes in Accounting Policies

59 4. Segmented Information


60 6. Long-Term Investment

63 7. Derivative Financial Instruments and Hedging Activities

69 8. Other Long-Term Investments

69 9. Debt

70 10. ECT Preferred Units

71 11. Trust Units

71 12. Other Income

72 13. Changes in Operating Assets and Liabilities

72 14. Income Taxes

156 Glossary

Enbridge Income FundFinancial Report


Management’s Discussion & AnalysisThis Management’s Discussion and Analysis (MD&A) datedFebruary 17, 2017 should be read in conjunction with the auditedfinancial statements and notes thereto of Enbridge Income Fund(the Fund) as at and for the year ended December 31, 2016,prepared in accordance with generally accepted accountingprinciples in the United States of America (U.S. GAAP). Unlessotherwise noted, all financial information is presented in Canadiandollars. Additional information related to the Fund, including itsAnnual Information Form, is available on SEDAR at www.sedar.com.

OverviewThe Fund is an unincorporated open-ended trust established bya trust indenture under the laws of the Province of Alberta. The Fund,through its indirect investment in Enbridge Income Partners LP(EIPLP), is involved in the transportation, storage and generationof energy. EIPLP owns interests in liquids transportation and storageassets, including the Canadian Mainline, the Regional Oil SandsSystem, a 50% interest in the Alliance Pipeline, which transportsnatural gas from Canada to the United States, and interestsin renewable and alternative power generation assets. EIPLPis a partnership between Enbridge Commercial Trust (ECT)and Enbridge Inc. (Enbridge).

The unitholders of the Fund are Enbridge Income Fund Holdings Inc.(ENF), a public company listed on the Toronto Stock Exchange (TSX),and Enbridge, a North American transporter, distributor and generatorof energy listed on the TSX and New York Stock Exchange. The Fundis a member of the Fund Group, which also includes ECT, EIPLPand the subsidiaries and investees of EIPLP. The Fund owns a directinvestment in ECT and an indirect investment in EIPLP. The financialperformance of the Fund is underpinned by the results of EIPLP,which holds the underlying operating entities and investments of theFund Group. Enbridge, through its wholly-owned subsidiary EnbridgeManagement Services Inc. (the Manager or EMSI), is responsiblefor the operations and day-to-day management of the Fund Group.The Manager also provides administrative and general supportservices to the Fund Group.

Enbridge’s total economic interest in the Fund Group was 86.9%at December 31, 2016 and at February 17, 2017 based on its indirectinterest in the Fund through ENF, its direct interest in the Fundthrough ordinary trust units of the Fund (Fund Units), its interestin preferred units of ECT (ECT Preferred Units) and its direct andindirect interest in units of EIPLP.

The financial performance of the Fund is a direct reflection ofthe performance of EIPLP, which owns all of the operating businessheld by the Fund Group. Readers are encouraged to read EIPLP’sconsolidated financial statements and MD&A which are filed underthe Fund’s profile on SEDAR at www.sedar.com.


On September 1, 2015, EIPLP acquired 100% interests inentities holding certain Canadian liquids pipelines, storageand renewable energy assets from Enbridge and certain of itssubsidiaries for aggregate consideration of $30.4 billion plusincentive distribution and performance rights and working capitaladjustments (the 2015 Transaction).

The 2015 Transaction resulted in changes to the Fund’smethod of accounting for its investments in ECT and EIPLPfrom consolidation accounting to the equity method ofaccounting due to certain ownership and governance changes(the Accounting Impacts). These changes were appliedprospectively from September 1, 2015, the closing dateof the 2015 Transaction. The results of operations priorto September 1, 2015 were accounted for on a consolidatedbasis. As such, the comparative period balances do not followthe same method of accounting as the current period andtherefore lack comparability.

ECT applies the Hypothetical Liquidation at Book Value (HLBV)method to its equity method investments where cash distributions,including both preference and residual distributions, are not basedon the investor’s ownership percentages. Under the HLBV method,a calculation is prepared at each balance sheet date to determinethe amount that ECT would receive if EIPLP were to liquidate allof its assets, as valued in accordance with U.S. GAAP, and distributethat cash to the investors. The di�erence between the calculatedliquidation distribution amounts at the beginning and the endof the reporting period, after adjusting for capital contributionsand distributions, is ECT’s share of the earnings or losses fromthe equity investment for the period.


On November 7, 2014, the Fund completed a transaction wherebyindirect wholly-owned subsidiaries of the Fund acquired fromEnbridge a 50% equity interest in the United States portionof the Alliance Pipeline (Alliance Pipeline US) and subscribedfor and purchased Class A Units of certain Enbridge subsidiarieswhich provide a defined cash flow stream from the United Statesportion of Southern Lights (Southern Lights Class A Units) foraggregate consideration of $1.8 billion (the 2014 Transaction).At the time of the 2014 Transaction, the Fund previously owneda 50% investment in the Canadian portion of the Alliance Pipeline.

Enbridge Income Fund Management’s Discussion & Analysis 33

Enbridge Income Fund Performance OverviewThree months ended

December 31,Year ended

December 31,

2016 2015 2016 2015 2014

(millions of Canadian dollars, except per unit amounts)

Earnings1 446 2 648 120 150

Cash flowdata

Cashprovidedbyoperating activities 370 109 733 509 323

Cashprovidedby/(used in) investing activities 522 (874) (921) (3,995) (1,806)

Cashprovidedby/(used in) financing activities (866) 764 194 3,457 1,483

Distributions

FundUnit distributions declared 117 86 454 213 114

FundUnit distribution per unit 0.5376 0.4723 2.1504 1.8892 1.6674

Total assets2 3,246 2,628 4,072

Total long-term liabilities2 2,100 2,218 3,003

1 Earnings include consolidated results for all periods prior to September 1, 2015.2 As at December 31, 2016, 2015 and 2014.

Earnings

The Fund’s earnings are primarily comprised of income from its indirect investment in EIPLP, reducedby incentive fees and preferred distributions paid to Enbridge by ECT. Earnings were $648 million forthe year ended December 31, 2016, compared with $120 million and $150 million for the comparableperiods of 2015 and 2014, respectively. Current year earnings include 12 months of equity investmentincome from ECT compared to the prior year which includes eight months of consolidated earnings of$146 million and four months of equity investment loss from ECT of $26 million, reflecting the changesin accounting discussed in Overview – The 2015 Transaction. As a result, 2016 earnings lack comparabilityto the prior year.

Additionally, the Fund’s equity investment earnings for the current year were impacted by a numberof unusual, non-recurring and non-operating factors in EIPLP’s earnings, most notably a pre-tax gainof $850 million related to the disposition of the South Prairie Region assets in December 2016, changesin unrealized derivative fair value gains and losses, changes in unrealized position on foreign currencytranslation on a United States dollar intercompany loan receivable and pipelines and facilities restartcosts incurred as a result of the northeastern Alberta wildfires.

Earnings for the three months ended December 31, 2016 were $446 million compared with $2 millionfor the three months ended December 31, 2015. The increase was primarily due to higher equityearnings in the fourth quarter of 2016 resulting from the gain on sale of the South Prairie Regionassets discussed above.

Cash Flows

Cash provided by operating activities was $733 million for the year ended December 31, 2016compared to $509 million and $323 million for the years ended December 31, 2015 and 2014,respectively. As a result of the 2015 Transaction, cash provided by operating activities lackcomparability to prior years due to the Accounting Impacts.

Since the 2015 Transaction, the Fund’s cash from operating activities is derived primarily fromdistributions received from ECT. These are underpinned by distributions from EIPLP and reflectthe impacts to earnings, discussed above. In 2016, distributions paid by ECT to the Fund were$42 million higher than the equity earnings recognized by the Fund from ECT, which were impactedby the gain on sale of the South Prairie Region assets. EIPLP made a special one-time distributionto ECT utilizing proceeds from the sale and ECT in turn paid a distribution of $264 million to the Fund.

Cash used in investing activities and cash provided by financing activities for the year endedDecember 31, 2016 reflect the investment in additional common units of ECT (ECT Trust Units)and issuance of Fund Units, draws on the credit facility, repayment of medium-term notes (MTNs)and increased Fund Unit distributions. For the year ended December 31, 2015, cash used in investingactivities and cash provided by financing activities reflect the investment in additional ECT Trust Units


and issuance of Fund Units in association with the 2015 Transaction.Cash used in investing activities and cash provided by financingactivities for the year ended December 31, 2014 reflect theinvestment in Alliance Pipeline US and Southern Lights Class A Unitsand the issuance of Fund Units, all in respect of the 2014 Transaction.Further details on cash used in investing activities and cash providedby financing activities are discussed in Distributions and Liquidityand Capital Resources.

The trends in cash provided by operating activities experiencedduring the fourth quarter of 2016 reflect the sale of the South PrairieRegion assets discussed above. Cash provided by investing activitiesfor the fourth quarter of 2016 reflected repayments from ECT of thedemand notes receivable. Cash used in financing activities reflectedrepayment of credit facility draws and MTNs in the fourth quarterof 2016 using proceeds from the special one-time distributionfrom ECT discussed above. Fund Unit distributions also increasedin the fourth quarter of 2016 as compared to the prior comparativeperiod. For the three months ended December 31, 2015, cash used ininvesting activities and provided by financing activities are consistentwith those discussed above for the corresponding annual period.

Distributions

The Fund pays monthly distributions to its unitholders. Distributionsfor the year ended December 31, 2016 were declared at an annualaggregate rate of $2.1504 per unit representing total distributionsof $454 million. Distributions for the years ended December 31, 2015and 2014 were declared at an annual aggregate rate of $1.8892per unit representing total distributions of $323 million, inclusiveof distributions on the ECT Preferred Units owned by Enbridgeprior to the close of the 2015 Transaction, and $1.6674 per unitrepresenting total distributions of $240 million, respectively.The increases in distributions through the years were due tothe increased number of Fund Units outstanding and increasesto the distribution rates per Fund Unit.


Forward-looking information, or forward-looking statements,have been included in this MD&A to provide information about theFund Group, including management’s assessment of future plansand operations of the Fund Group. This information may not beappropriate for other purposes. Forward-looking statements aretypically identified by words such as “anticipate”, “expect”, “project”,“estimate”, “forecast”, “plan”, “intend”, “target”, “believe”, “likely” andsimilar words suggesting future outcomes or statements regardingan outlook. Forward-looking information or statements included orincorporated by reference in this document include, but are not limitedto, statements with respect to the following: earnings/(loss); adjustedearnings/(loss), adjusted earnings before interest and taxes (EBIT)or available cash flow from operations (ACFFO); cash flows; capitalexpenditures; capital requirements through 2017; organic growthopportunities beyond secured projects; impact of hedging program;future distributions to the Fund by ECT; use of proceeds from thesale of Fund Units; the filing of an MTN shelf prospectus; taxationof distributions; and future distributions and distribution targets.

Although the Fund believes these forward-looking statements arereasonable based on the information available on the date suchstatements are made and processes used to prepare the information,

such statements are not guarantees of future performance andreaders are cautioned against placing undue reliance on forward-looking statements. By their nature, these statements involve avariety of assumptions, known and unknown risks and uncertaintiesand other factors, which may cause actual results, levels of activityand achievements to di�er materially from those expressed or impliedby such statements. Material assumptions include assumptions aboutthe following: supply, demand and prices for crude oil, natural gas,natural gas liquids (NGL) and renewable energy; exchange rates;inflation; Canadian pipeline export capacity; levels of competition;interest rates; availability and price of labour and constructionmaterials; operational reliability; customer and regulatory approvals;maintenance of support and regulatory approvals for the Fund Group’sprojects; in-service dates; weather; the Fund Group’s credit ratings;earnings/(loss); adjusted earnings/(loss) or adjusted EBIT; cash flowsand ACFFO; and distributions. Assumptions regarding the expectedsupply of and demand for crude oil, natural gas, NGL and renewableenergy, and the prices of these commodities, are material to andunderlie all forward-looking statements. These factors are relevantto all forward-looking statements as they may impact current andfuture level of demand for the Fund Group’s services. Similarly,exchange rates, inflation and interest rates impact the economiesand business environments in which the Fund Group operates andmay impact level of demand for the Fund Group’s services and costof inputs, and are therefore inherent in all forward-looking statements.Due to the interdependencies and correlation of these macroeconomicfactors, the impact of any one assumption on a forward-lookingstatement cannot be determined with certainty, particularly withrespect to earnings/(loss), adjusted earnings/(loss), adjusted EBIT,ACFFO or future distributions. The most relevant assumptionsassociated with forward-looking statements on projects underconstruction, including completion dates and capital expendituresinclude the following: availability and price of labour and constructionmaterials; e�ects of inflation and foreign exchange rates on labourand material costs; e�ects of interest rates on borrowing costs;impact of weather; and customer, government and regulatory approvalson construction and in-service schedules and cost recovery regimes.

The Fund Group’s forward-looking statements are subject to risksand uncertainties pertaining to operating performance, regulatoryparameters, project approval and support, renewals of rights ofway, weather, economic and competitive conditions, public opinion,changes in tax laws and tax rates, exchange rates, interest rates,commodity prices and supply of and demand for commodities,including but not limited to those risks and uncertainties discussedin this MD&A and in the Fund Group’s other filings with Canadiansecurities regulators. The impact of any one risk, uncertainty or factoron a particular forward-looking statement is not determinable withcertainty as these are interdependent and the Fund Group’s futurecourse of action depends on management’s assessment of allinformation available at the relevant time. Except to the extentrequired by applicable law, the Fund assumes no obligation to publiclyupdate or revise any forward-looking statements made in this MD&Aor otherwise, whether as a result of new information, future eventsor otherwise. All subsequent forward-looking statements, whetherwritten or oral, attributable to the Fund Group or persons actingon the Fund Group’s behalf, are expressly qualified in their entiretyby these cautionary statements.


Non-GAAP MeasuresThis MD&A contains references to the Fund’s adjusted earnings, EIPLP adjusted EBIT and EIPLP ACFFO.The Fund’s adjusted earnings represent the Fund’s earnings adjusted for unusual, non-recurring ornon-operating factors, including unusual, non-recurring or non-operating factors underpinning theFund’s indirect equity earnings of EIPLP. EIPLP adjusted EBIT represent EIPLP’s earnings beforeinterest and income taxes, respectively, adjusted for unusual, non-recurring or non-operating factorson a consolidated basis. These factors, referred to as adjusting items, are reconciled and discussed inNon-GAAP Reconciliation – Fund Earnings to Fund Adjusted Earnings and Enbridge Income Partners LPPerformance Overview.

EIPLP ACFFO represents EIPLP’s cash available to fund distributions on EIPLP Class A and EIPLP ClassC units, as well as for debt repayments and reserves. EIPLP ACFFO consists of EIPLP adjusted EBITfurther adjusted for non-cash items, representing cash flow from EIPLP’s underlying businesses,less deductions for maintenance capital expenditures, interest expense, applicable taxes and furtheradjusted for unusual, non-recurring or non-operating factors not indicative of the underlying orsustainable cash flows of the business. EIPLP ACFFO is important to unitholders as the Fund Group’sobjective is to provide a predictable flow of distributions to unitholders.

The Manager believes the presentation of the Fund’s adjusted earnings, EIPLP adjusted EBITand EIPLP ACFFO give useful information to investors and unitholders as they provide increasedtransparency and insight into the performance of the Fund Group. The Manager uses the Fund’s adjustedearnings, EIPLP adjusted EBIT and EIPLP ACFFO to set targets, including the distribution payout target,and to assess the performance of the Fund Group. The Fund’s adjusted earnings, EIPLP adjusted EBITand EIPLP ACFFO are not measures that have standardized meanings prescribed by U.S. GAAP andare not U.S. GAAP measures. Therefore, these measures may not be comparable with similar measurespresented by other issuers.

The tables below summarize the reconciliation of the GAAP and non-GAAP measures.

Non-GAAP Reconciliation – Earnings to Adjusted Earnings



2016 2015 2016 2015 2014


Earnings1 446 2 648 120 150

Fund adjusting items:

Adjusting items at EIPLP2 (427) 34 (582) 91 –

Transaction costs3 – – – 12 6

AlliancePipelineUS retrospective accounting adjustments4 – – – – (39)

Other5 – – – (22) (6)

Fundadjusted earnings 19 36 66 201 111

1 See Overview for impacts of the 2015 Transaction and the 2014 Transaction.2 Represents ECT’s portion of the unusual, non-recurring or non-operating items within earnings of EIPLP.3 Includes transaction costs related to the 2015 Transaction and the 2014 Transaction. Transaction costs include fees primarily related to financial, technical and legal advisors.4 In accordance with U.S. GAAP, earnings for the year ended December 31, 2014 have been retrospectively adjusted to furnish comparative information related to Alliance Pipeline US.

The impact of the retrospective adjustments has been removed from adjusted earnings to reflect earnings generated under the Fund’s ownership e�ective November 7, 2014.5 Primarily includes changes in unrealized derivative instrument fair value and changes in unrealized position on foreign currency translation on a United States dollar intercompany

loan receivable.

Adjusted earnings for the year ended December 31, 2016 were $66 million compared with $201 millionfor the year ended December 31, 2015 and $111 million for the year ended December 31, 2014. Adjustedearnings for the three months ended December 31, 2016 were $19 million compared with $36 million forthe three months ended December 31, 2015. The Fund’s adjusted earnings were impacted by the samefactors impacting earnings, discussed previously; however, the Fund adjusted for ECT’s portion of theunusual, non-recurring or non-operating items within earnings of EIPLP, the most noteworthy of whichrelated to changes in unrealized derivative fair value gains and losses and a pre-tax gain of $850 millionrelated to the sale of the South Prairie Region assets.


Enbridge Income Partners LP Performance Overview

The performance of the Fund is ultimately derived from the underlying operating segments of itsindirect investee EIPLP. These operating segments are strategic business units established by seniormanagement to facilitate the achievement of EIPLP’s long-term objectives and the objectives of EIPLP’spartners, as well as to aid in resource allocation decisions and to assess operational performance.Financing costs, current and deferred income taxes and other costs not attributable to specific businesssegments are presented on a consolidated basis. An overview of EIPLP’s operating segments, LiquidsPipelines, Gas Pipelines and Green Power, is provided below.

Liquids Pipelines Overview

Liquids Pipelines consists of common carrier and contract crude oil, NGL and refined products pipelines,feeder pipelines, gathering systems and terminals in Canada, including Canadian Mainline, Regional OilSands System, Southern Lights Pipeline, which includes Southern Lights Canada and Southern LightsClass A Units, Bakken System and Feeder Pipelines and Other.

Gas Pipelines Overview

Gas Pipelines includes EIPLP’s 50% interest in the Alliance Pipeline system, which transports liquids-richnatural gas from northeast British Columbia, northwest Alberta and the Bakken area of North Dakotato Channahon, Illinois.

Green Power Overview

Green Power includes approximately 1,437 megawatts (MW) (1,052 MW net after taking into account thirdparty interests) of renewable and alternative energy generating capacity from wind farms, solar facilitiesand waste heat recovery facilities located primarily in the provinces of Alberta, Saskatchewan, Ontarioand Quebec.

Performance Overview

A summary of financial information of EIPLP derived from its consolidated financial statements preparedin accordance with U.S. GAAP is provided below. Readers are encouraged to read EIPLP’s financialstatements and MD&A which are filed on SEDAR at www.sedar.com under the Fund’s profile.



2016 2015 2016 2015 2014


Earnings before interest and income taxes 1,215 387 3,096 448 942

Retrospective adjustments1 – – – 279 (684)

Changes in unrealized derivative fair value (gains)/loss 87 116 (502) 371 25

Gain on sale of SouthPrairie Region assets (850) – (850) – –

Other 20 (25) 143 (165) (35)

EIPLPadjustedEBIT2 472 478 1,887 933 248

EIPLPACFFO2 543 509 2,051 986 367

Distributions

ClassAUnit distributions declared toECT 217 169 850 546 349

ClassAUnit distribution per unit 0.5667 0.4874 2.2586 1.9669 1.7621

1 The impact of the retrospective adjustments related to the 2015 Transaction has been removed from EIPLP adjusted EBIT to reflect earnings generated under EIPLP’s ownershipprior to September 1, 2015. Retrospective adjustments also include the impacts of significant, unusual, non-recurring or non-operating factors included in the retrospectivelyadjusted amounts for U.S. GAAP purposes.

2 EIPLP adjusted EBIT and EIPLP ACFFO are non-GAAP measures that do not have a standardized meaning prescribed by U.S. GAAP. For more information, see Non-GAAP Measures.


EIPLP Adjusted EBIT

The increase in EIPLP adjusted EBIT year-over-year is attributableto the substantial increase of EIPLP’s asset base following the 2015Transaction. The most notable assets contributing incremental EIPLPadjusted EBIT were the Canadian Mainline, due to expansion, as wellas the reversal and expansion of Line 9B in the fourth quarter of 2015and the Regional Oil Sands System, which benefitted from assetsplaced into service late in 2015. These incremental contributionswere partially o�set by the impact of extreme wildfires in northeasternAlberta and the combination of lower average International JointTari� (IJT) Residual Benchmark Tolls on the Canadian Mainline, whichdecreased e�ective April 1, 2016, and a lower foreign exchange rateon hedges used to convert Canadian Mainline United States dollartoll revenues to Canadian dollars. Also bolstering EIPLP’s adjustedEBIT were higher contributions from its Gas Pipelines segmentresulting from operational e�ciencies achieved by Alliance Pipeline.

EIPLP adjusted EBIT for the fourth quarter decreased slightly in2016 compared with the same period of 2015, reflecting increasedvolumes and the impact of the reversal and expansion of Line 9B,more than o�set by a decrease in the Canadian Mainline IJT ResidualBenchmark Toll and a lower rate on foreign exchange hedges ofUnited States dollar toll revenue over the prior year, as discussedabove. The IJT Residual Benchmark Toll is reset on an annual basis,e�ective April 1 of each year.

EIPLP ACFFO

Similar to adjusted EBIT, the year-over-year increase in EIPLPACFFO was driven by the significant increase of EIPLP’s asset basefollowing the 2015 Transaction as well as stronger contributionsfrom EIPLP’s investment in Alliance Pipeline and lower currentincome taxes due to the optimization of tax deductions withinthe Fund Group. The respective increases were partially o�setby higher maintenance capital expenditures and higher interestexpense, both resulting from increased business activity associatedwith the increased asset base. EIPLP ACFFO was also negativelyimpacted by approximately $36 million as a result of the northeasternAlberta wildfires in the second quarter of 2016 and incentivedistributions paid to Enbridge beginning in 2016. The fourthquarter of 2016 reflected similar operational trends as notedin the discussion on EIPLP adjusted EBIT.

EIPLP Distributions

EIPLP declares distributions to its partners on a monthly basis.The year-over-year increase in the distributions declared to ECTis a direct result of the units issued in connection with the 2015Transaction and an increase in the distribution rate in 2016.In addition, EIPLP also paid a special one-time distribution to ECTof $264 million following the close of the disposition of the SouthPrairie Region assets in December 2016. The distributions receivedby ECT are used to fund the fees paid to Enbridge and distributionspayable to its unitholders, Enbridge and the Fund.

Recent Developments

Disposition of SouthPrairie RegionAssets

On December 1, 2016, EIPLP sold the South Prairie Region assetswithin Feeder Pipelines and Other to an unrelated party for cashproceeds of $1.08 billion. The proceeds from this transactionare expected to be su�cient to meet all of the Fund’s currentlyanticipated capital requirements through 2017.

Fund Group Objectives and StrategyThe Fund Group’s objectives are to provide a predictable flowof distributable cash and to increase, where prudent, cashdistributions through investment in and ongoing managementof low risk energy infrastructure assets. The Fund Group’s objectivesand strategies are also aligned to support the corporate visionand strategies of its sponsor, Enbridge.

In order to achieve these objectives, the Manager relies onthe following strategic priorities:





The Fund Group is closely focused on safety, system performanceand operating e�ectiveness. The commitment to safety andoperational reliability means achieving and maintaining industryleadership in safety (process, public and personal) and ensuringthe operational reliability and integrity of the systems the Fund Groupoperates in order to generate, transport and deliver the energysociety counts on while protecting the environment.

Within the Fund Group’s Liquids Pipelines assets, strategiesto strengthen the core business are focused on optimizing assetperformance, strengthening stakeholder and customer relationshipsand providing access to new markets for production from westernCanada, all while ensuring safe and reliable operations. The FundGroup’s assets are strategically located and well-positioned tocapitalize on opportunities. In 2016, despite unfavourable commoditymarket conditions, the Canadian Mainline delivered record volumesof crude, driven by strong supply and refinery demand in combinationwith e�orts to maximize capacity and throughput as well as enhancedscheduling e�ciency with shippers.

The Liquids Pipelines business that the Fund Group acquired inthe 2015 Transaction is expected to have future organic growthopportunities beyond the current inventory of secured projects.The Fund Group will have a first right to execute any such projects thatfall within the footprint of the Canadian Liquids Pipelines business.

Within the Gas Pipelines assets, the Fund Group seeks to optimizethe competitive advantage of its existing asset footprint, as theAlliance Pipeline is well-positioned to provide liquids-rich gastransportation services to developing regions in northeastern BritishColumbia, northwestern Alberta and the Bakken. Alliance Pipelinesuccessfully re-contracted its firm capacity with shippers underits new services framework that came into e�ect in December 2015.


Long-term contracts have been secured through staged andnon-staged receipt or full path services with an average contractlength of approximately five years. In 2016, Alliance Pipelinebenefitted from strong demand for seasonal firm services throughits open season process.

Within the Green Power assets, strategies are driven bythe objective to manage and maintain facilities in such a way asto maximize power generation and related revenues when therelevant wind, solar or waste heat energy resource is available.

The Manager will continue to assess ways to generate value forthe Fund Group, including reviewing opportunities that may leadto acquisitions or other strategic transactions, some of which maybe material and may involve Enbridge. Opportunities are screened,analyzed and assessed using strict operating, strategic andfinancial criteria with the objective of ensuring the e�ectivedeployment of capital and the enduring financial strength andstability of the Fund Group.

Preservation of financial flexibility will continue to be a strategicpriority. Ongoing access to cost e�ective sources of debt and equitycapital is critical to the successful execution of the Fund Group’sstrategy to expand existing assets and acquire or develop newenergy infrastructure.

Liquidity and Capital ResourcesIn keeping with its low risk value proposition, the Fund activelymonitors and manages exposure to financial risks. The Fund’sfinancing strategy is to maintain strong investment grade creditratings and ongoing access to capital markets. To protect againstmore severe market disruptions, the Manager targets to maintainsu�cient liquidity in the form of committed standby credit facilitiesto finance anticipated operating and capital requirements for atleast one year without having to access long-term capital markets.


The Fund’s primary uses of cash are distributions to unitholders,investments, administrative expense and interest and principalrepayments on the Fund’s long-term debt. Liquidity can be metthrough a variety of sources including cash distributions from ECT,new o�erings of debt and equity, draws under the Fund’s committedstandby credit facilities, as well as loans from a�liates. The Fund expectsto file a current shelf prospectus for MTNs with Canadian securitiesregulators in the first quarter of 2017, which will enable ready accessto Canadian public capital markets, subject to market conditions.

In September 2016, the Fund’s credit ratings were a�rmed as follows:

• DBRS Limited a�rmed the Fund’s issuer rating and MTNs andunsecured debentures rating of BBB (high) with stable outlook.

• Moody’s Investor Services, Inc. a�rmed the Fund’scorporate credit rating and unsecured debt rating of Baa2with negative outlook.

Long-term Debt

Long-term debt consists of MTNs and a committed credit facility.As at December 31, 2016, the Fund had a $1,500 million committed

credit facility, of which $225 million (2015 – nil) was drawn and lettersof credit totalling $11 million (2015 – $11 million) were issued, leaving$1,264 million (2015 – $1,489 million) unutilized. The Fund mustadhere to covenants under its credit facility agreement, includingcovenants that limit outstanding debt to a percentage of the Fund’sand EIPLP’s capitalization. The Fund was in compliance with allcovenants as at December 31, 2016.

No MTNs were issued during the years ended December 31, 2016and 2015.

For the years ending December 31, 2017 through December 31, 2021,MTN maturities are $325 million, $125 million, $300 million, $100 millionand nil, respectively, and $1,225 million thereafter.

Equity

In April 2016, ENF completed a public equity o�ering of 20.4 millioncommon shares at a price of $28.25 per share (the O�ering Price)for gross proceeds of $575 million. Concurrent with the closing ofthe equity o�ering, Enbridge subscribed for 5.0 million ENF commonshares at the O�ering Price, for total proceeds of $143 million,on a private placement basis. ENF used the proceeds from thesale of its common shares to subscribe for 25.4 million Fund Unitsat the O�ering Price for gross proceeds of $718 million.

ENF shareholders are able to participate in an amended DividendReinvestment and Share Purchase Plan (DRIP). Registration in theDRIP enables ENF shareholders to reinvest their dividends in ENFCommon Shares at a 2% discount to market price and to makeadditional optional cash payments to purchase ENF Common Sharesat the market price, free of brokerage or other charges. The issuanceof common shares from treasury for dividends reinvested pursuantto the DRIP enables ENF to retain cash which it in turn uses topurchase additional Fund Units. For the year ended December 31, 2016,ENF retained approximately $49 million (2015 – $1 million) of cashin respect of reinvested dividends and optional cash payments fromENF’s DRIP which was used to purchase 1.6 million (2015 – 25,918)Fund Units.

It is expected that the proceeds from the Fund Unit issuanceswill ultimately be used to fund the secured capital growth projectsassociated with the Canadian liquids pipelines assets ownedby EIPLP.

Investments

During the second quarter of 2016, the Fund used the gross proceedsof $718 million from the Fund Unit issuances to ENF to invest in25.4 million ECT common units. In turn, ECT used the proceedsto invest in 25.4 million Class A units of EIPLP, increasing the Fund’sindirect investment in EIPLP to 46.0%. EIPLP used the proceedsto fund the secured capital growth projects within the Fund Group.

Distributions

E�ective with the January 2016 distribution, the Fund’s monthlydistribution rate increased to $0.1792 per outstanding Fund Unit,representing aggregate distributions for the year of $454 million.During 2015, the Fund declared distributions on its outstanding FundUnits at a rate of $0.1574 per unit per month, representing aggregatedistributions for the year of $213 million.


Analysis of Cash Distributions DeclaredYear endedDecember 31, 2016 2015 2014


Cashprovidedbyoperating activities1 733 509 323

Earnings1 648 120 150

Cashdistributions declared 454 323 240

Excess of cash providedbyoperating activities over cash distributions declared 279 186 83

Excess/(shortfall) of earnings over cash distributions declared 194 (203) (90)

1 For the year ended December 31, 2015, Cash provided by operating activities and Earnings reflect the Accounting Impacts of the 2015 Transaction, as discussed in Overview.Cash provided by operating activities and Earnings for the year ended December 31, 2014 have been retrospectively adjusted by $53 million and $39 million, respectively, to furnishcomparative information related to Alliance Pipeline US as prescribed by U.S. GAAP for common control transactions. These retrospective adjustments were not availableto distribute by the Fund during those periods.

For the year ended December 31, 2016, cash provided by operating activities exceeded cashdistributions declared by $279 million (2015 – $186 million). Cash provided by operating activitiesincludes the cash distributions received from the Fund’s equity investments which may not bereflective of the income from the Fund’s equity investments. Cash distributions received from the Fund’sinvestments are the primary source of cash flow the Fund uses to pay distributions to its unitholdersand service its long-term debt.

Earnings exceeded cash distributions by $194 million for the year ended December 31, 2016(2015 – $203 million shortfall). Earnings reflected non-cash items such as income from equityinvestments and amortization of deferred financing costs. The comparative year also reflecteddepreciation, deferred income taxes and changes in unrealized derivative fair value gains and losses,all of which do not impact cash flow.

Taxation of Distributions and Dividends

Under Canadian tax laws, a component of the Fund’s cash distributions is taxable in the handsof the unitholder, with the remaining portion treated as a return of capital. In addition, a portionof the distribution can take the form of a non-taxable intercorporate dividend.

Sustainability of Distributions and Productive Capacity

The current level of distributions may change based on the performance of the Fund’s investments,the level of continued investment or the Fund’s ability to raise capital. The ECT Board of Trusteesperiodically approves changes to distributions. Distributable cash flow is defined to generally meancash from operating, investing and financing activities, less certain items, including repayment of anyindebtedness required in the period and any cash withheld as a reserve as determined by the Manager.

The sustainability of the Fund’s distributions is a function of several factors, including:

• the ability to economically obtain financing to fund growth;

• the ability to comply with covenants in debt agreements;

• the ability to repay or refinance debt as it comes due; and

• the performance of the businesses underpinning EIPLP’s investments, including the demand forthe services provided and the e�ective maintenance of the productive capacity of the asset base.

To the extent that ENF does not fund portions of the growth capital, Enbridge will be required untilDecember 31, 2020 to provide the Fund Group with equity financing for such projects, unless the projectis related to the Line 3 Replacement Program in which case Enbridge’s obligation will be to fund the equityrequirements for such project until it is placed into service.


Quarterly Financial Information2016 Q1 Q2 Q3 Q4 Total


Income fromequity investments 238 5 27 477 747

Earnings/(loss) 216 (19) 5 446 648

Cashdistributions received in excess of/(less than) equity earnings (98) 123 102 (85) 42

Cashdistributions declared 103 117 117 117 454

Cashdistributions declared per unit 0.5376 0.5376 0.5376 0.5376 2.1504

2015 Q1 Q2 Q31 Q4 Total


Revenues 113 112 73 – 298

Income fromequity investments2 39 47 1 28 115

Earnings 70 34 14 2 120

Cashdistributions received in excess of/(less than) equity earnings (8) (9) 78 100 161

Cashdistributions declared 79 79 79 86 323

Cashdistributions declared per unit 0.4723 0.4723 0.4723 0.4723 1.8892

1 The third quarter of 2015 includes two months accounted for on a consolidated basis and one month accounted for on an equity method basis as a result of the Accounting Impacts.2 Includes income from the Fund’s investment in ECT subsequent to the close of the 2015 Transaction and income from the Fund’s investment in Alliance Pipeline prior to the close

of the 2015 Transaction recorded within Income from equity investment in ECT and Income from other equity investments on the Statements of Earnings.

As a result of the Accounting Impacts of the 2015 Transaction, quarterly information presented forperiods prior to the close of the 2015 Transaction on September 1, 2015 are presented on a consolidatedbasis and quarterly information presented for periods subsequent to the close of the 2015 Transactionare presented on an equity method basis. Further, cash distributions declared prior to September 1, 2015include distributions on both the Fund Units and ECT Preferred Units. Subsequent to September 1, 2015,cash distributions declared include only distributions on the Fund Units.

Therefore, the Fund’s quarterly results before and after September 1, 2015 lack comparability andthe analysis of the quarterly results described below has been segregated between the equity methodbasis period and the consolidated basis period.

Equity Method Basis

Several factors impact comparability of the Fund’s financial results on a quarterly basis through itsindirect investment in EIPLP, including, but not limited to, fluctuations in market prices such as foreignexchange rates and commodity prices, disposals of investments or assets and the timing of in-servicedates of new projects.

EIPLP actively manages its exposure to market risks including, but not limited to, interest rates,commodity prices and foreign exchange rates. To the extent derivative instruments used to managethese risks are non-qualifying for the purposes of applying hedge accounting, changes in unrealizedderivative fair value gains and losses on these instruments will impact earnings.

In addition to the impacts of changes in unrealized derivative fair value gains and losses outlined above,the following significant items have impacted quarterly financial information:

• The fourth quarter of 2016 includes the sale of South Prairie Region assets, which closedon December 1, 2016 resulting in a pre-tax gain of $850 million within EIPLP. Following the sale,a one-time cash distribution of $264 million was received from ECT.

• The second quarter of 2016 includes reduced equity earnings from EIPLP due to the northeasternAlberta wildfires. Also in the second quarter of 2016, the Fund issued 25.4 million Fund Unitsincreasing the total cash distributions declared.

• In the first quarter of 2016, the monthly Fund Unit distribution rate increased to $0.1792 commencingwith the January 2016 distribution.

• In the fourth quarter of 2015, cash distributions received from the Fund’s investment in ECT werein excess of the equity earnings received from the same investment reflecting the significant cashgenerating ability in the underlying asset base.

• In the third quarter of 2015, revenues and earnings for the period decreased due to the Accounting Impacts.


Consolidated Basis

Significant items that have impacted quarterly financial information are as follows:

• In the first quarter of 2015, the Fund realized a full quarter of benefits from the 2014 Transaction.

Earnings also included the benefit of favourable foreign exchange on the translation of a United

States dollar denominated intercompany loan partially o�set by unrealized derivative fair value losses.

Related Party TransactionsUnless otherwise noted, all related party transactions have been measured at the exchange amount

of consideration established and agreed to by the related parties. The 2015 Transaction and the 2014

Transaction were accounted for as transactions among entities under common control. See Overview

for additional information.

As a result of the 2015 Transaction, the majority of the Fund’s a�liate balances are with ECT.

Previously, these balances were eliminated on consolidation.

Demand Notes Receivable from Enbridge Commercial Trust

December 31, 2016 2015


Non-interest bearing note, due ondemand fromECT – 303

Floating interest rate note, due ondemand fromECT 654 148

654 451

For the year ended December 31, 2016, Other income – a�liates included interest income of $8 million

(2015 – $1 million) related to the floating interest rate note payable from ECT. Both the non-interest

bearing note receivable and the floating interest rate note receivable are due on demand.

Accounts Receivable from A�liates

December 31, 2016 2015


Distributions receivable fromECT 43 44

Accounts receivable fromECT 2 13

Accounts receivable fromEPI – 12

Other accounts receivable froma�liates – 3

45 72

For the year ended December 31, 2016, the Fund’s investment in ECT reflects $789 million

of distributions (2015 – $168 million) and $718 million of contributions (2015 – $3,874 million).

For the year ended December 31, 2015 and 2014, Other income – a�liates included $51 million and

$6 million, respectively, of interest income related to the Southern Lights Class A Units long-term

receivable which were subscribed for and purchased as part of the 2014 Transaction.

Long-term Notes Receivable from Enbridge Commercial Trust

December 31, 2016 2015


5.69%due June22, 2017 fromECT1 96 96

7.00%dueNovember 12, 2020 fromECT 100 100

196 196

1 This note receivable has been classified as non-current on the Statements of Financial Position as the maturity date is expected to be extended prior to maturity.

For the year ended December 31, 2016, Other income – a�liates included $13 million (2015 – $4 million)

of interest income related to the long-term notes receivable from ECT.


Distributions Payable to A�liates

As at December 31, 2016, Distributions payable to a�liates includedFund Unit distributions payable to ENF of $22 million (2015 – $15 million)and to Enbridge of $17 million (2015 – $15 million).

Due to A�liates

Under the management and administrative agreements with EMSI,an incentive fee is payable annually from ECT to EMSI basedon cash distributions above a base distribution level. For the yearended December 31, 2016, no incentive fees were recorded asthe Fund no longer consolidates ECT. Prior to September 1, 2015,the results of ECT’s operations were accounted for on a consolidatedbasis and incentive fees of $23 million were recorded withinOperating and administrative expense – a�liate on the Statementsof Earnings for both the years ended December 31, 2015 and 2014.

The Fund does not have any employees and prior to September 1, 2015,wholly-owned subsidiaries of the Fund used the services of Enbridgefor managing and operating the businesses. For the year endedDecember 31, 2016, no service fees were recorded as the Fundno longer consolidates ECT. Prior to September 1, 2015, the resultsof operations from the Fund’s wholly-owned subsidiaries wereaccounted for on a consolidated basis and the service fees of$34 million and $48 million were recorded for the years endedDecember 31, 2015 and 2014, respectively, were recorded withinOperating and administrative expense – a�liate on the Statementsof Earnings.

These services were charged at cost in accordance with theservice agreements.

Other A�liate Transactions

During 2016, the Fund paid $24 million (2015 – $28 million;2014 – $14 million) for share issue costs incurred in connection withthe public o�ering of 20.4 million common shares (2015 – 21.5 millioncommon shares; 2014 – 11 million subscription receipts) by ENF.

On September 1, 2015, the Fund entered into interest rate derivativeinstrument agreements with Enbridge to limit the Fund Group’sexposure to interest rate fluctuations in addition to its pre-existingexternal agreements. The Fund also had existing foreign exchangederivative instrument agreements with external counterpartiesand o�setting foreign exchange derivative instrument agreementswith a wholly-owned subsidiary of EIPLP. The net a�liate derivativeinstrument balance was $45 million asset (2015 – $2 million asset).

In November 2014, the Fund received an $878 million loan fromEnbridge, a related party by virtue of its ownership of ECT PreferredUnits and Fund Units, to partially finance the purchase of SouthernLights Class A Units and Alliance Pipeline US. Interest expenseon this loan of $2 million was incurred by the Fund for the year endedDecember 31, 2014 and had been paid in full as at December 31, 2014.The subscription price for the Southern Lights Class A Units wasat a fixed exchange rate of Canadian dollars to the United Statesdollar price. Given exchange rates on the date of closing, the Fundrecorded a realized foreign exchange gain of $22 million in the fourthquarter 2014.

Risk Management andFinancial InstrumentsMaintaining a reliable and low risk business model is central tothe Fund Group’s objective of paying out a predictable cash flowto unitholders. The Fund Group actively manages both financialand non-financial risks it is exposed to. The Fund Group performsan annual corporate risk assessment to identify all potential risks.Risks are ranked based on severity and likelihood both before andafter mitigating actions. In addition, the Fund Group has adopted aCash Flow at Risk (CFAR) policy to manage exposure to movementsin interest rates, foreign exchange rates and commodity prices.CFAR is a statistically derived measurement that quantifies themaximum adverse impact on cash flows over a specified periodof time within a pre-defined level of statistical confidence. The FundGroup’s CFAR limit has been set at 2.5% of forward annual availablecash flows from operations of the Fund Group.

Interest Rate Risk

The Fund’s earnings, cash flows and other comprehensive income(OCI) are exposed to short term interest rate variability due to theregular repricing of its variable rate debt, primarily credit facilities.Floating to fixed interest rate swaps are used to hedge against thee�ect of future interest rate movements. The Fund has implementeda program to mitigate the volatility of short-term interest rates oninterest expense with the execution of floating to fixed rate interestrate swaps at an average swap rate of 2.5%.

The Fund’s earnings, cash flows and OCI are also exposedto variability in longer term interest rates ahead of anticipated fixedrate debt issuances. Forward starting interest rate swaps may beused to hedge against the e�ect of future interest rate movements.The Fund has implemented a program to mitigate its exposureto long-term interest rate variability on select forecast term debtissuances with the execution of floating to fixed interest rateswaps at an average swap rate of 3.1%.

The Fund uses qualifying derivative instruments to manageinterest rate risk.


E�ect of Derivative Instruments on the Statements of Earnings and Comprehensive Income

The following table presents the e�ect of cash flow hedges on the Fund’s earningsand comprehensive income.

Year endedDecember 31, 2016 20151 20141


Amount of unrealized gains/(loss) recognized inOCI

Interest rate contracts (44) (43) (29)

Foreign exchange contracts – 2 1

Commodity contracts – 1 3

(44) (40) (25)

Amount of (gains)/loss reclassified fromaccumulated other comprehensive loss (AOCI) to earnings(e�ective portion)

Interest rate contracts2 6 5 4

Commodity contracts4 – (1) (1)

6 4 3

Amount of loss reclassifieddue to change to equity accounting

Foreign exchange contracts – (3) –

Commodity contracts – (2) –

Total loss reclassifieddue to change to equity accounting – (5) –

Amount of loss reclassified fromAOCI to earnings (ine�ective portion and amount excluded from e�ectiveness testing)

Interest rate contracts2 13 4 –

Amount of unrealized loss fromnon-qualifying derivatives included in earnings

Foreign exchange contracts3 – (77) (25)

1 See Overview for impacts of the 2015 Transaction and the 2014 Transaction.2 Reported within Interest expense in the Statements of Earnings.3 Reported within Other income in the Statements of Earnings.4 Reported within Electricity sales revenues in the Statements of Earnings.

Liquidity Risk

Liquidity risk is the risk that the Fund will not be able to meet its financial obligations, includingcommitments, as they become due. In order to manage this risk, the Fund forecasts the cashrequirements over the near and long term to determine whether su�cient funds will be available whenrequired. The Fund’s primary sources of liquidity and capital resources are funds generated from itsindirect investment in EIPLP, draws under committed credit facilities, issuance of MTNs and the issuanceof Fund Units. The Fund expects to file a current MTN shelf prospectus with Canadian securitiesregulators in the first quarter of 2017, which will enable, subject to market conditions, ready accessto Canadian public capital markets. Additional liquidity, if necessary, is expected to be available throughintercompany transactions with Enbridge or other related entities.

Credit Risk

Entering into derivative financial instruments may result in exposure to credit risk. Credit risk arises fromthe possibility that a counterparty will default on its contractual obligations. The Fund enters into riskmanagement transactions only with institutions that possess investment grade credit ratings. Credit riskrelating to derivative counterparties is mitigated by credit exposure limits and contractual requirements,netting arrangements and ongoing monitoring of counterparty credit exposure using external credit ratingservices and other analytical tools.


Fair Value Measurements

The Fund uses the most observable inputs available to estimatethe fair value of its financial instruments. When possible, the Fundestimates the fair value of its financial instruments based on quotedmarket prices. If quoted market prices are not available, the Funduses estimates from third party brokers. For non-exchange tradedderivatives, the Fund uses standard valuation techniques to calculatethe estimated fair value. These methods include discounted cashflows for forwards and swaps. Depending on the type of financialinstrument, the Fund uses observable market prices and volatilityas primary inputs to these valuation techniques. Finally, the Fundconsiders its own credit default swap spread as well as the creditdefault swap spreads associated with its counterparties in itsestimation of fair value.

General Business Risks

Readers are referred to EIPLP’s risk factor disclosure underthe headings “General Business Risks” and “Risk Managementand Financial Instruments” in EIPLP’s MD&A.

The following are certain risk factors relating to the activitiesof the Fund.

Future Distributions

Distributions declared on the Fund Units are wholly-dependenton the declaration of distributions by ECT. ECT’s distributiondeclarations are in turn wholly-dependent on the declarationof distributions by EIPLP. Future distribution payments by the Fundand the level thereof are uncertain as the Fund’s distributionspractices and the funds available for the payment of distributionsfrom time to time will be dependent upon, among other things,operating cash flow generated by EIPLP and its respectiveoperations and investments, financial requirements for the Fundand its investments’ operations and the Fund Group’s abilityto execute its growth strategy.

Availability of Financing

If the Fund pays out a high proportion of the distributions receivedfrom ECT to unitholders by way of distributions, it may haveto enter into financings or other transactions involving the issuanceof securities by the Fund in order to obtain funds for businesspurposes. An inability to raise new debt and equity capital maylimit the Fund Group’s ability to grow and execute its business plan.The issuance of equity securities may also be dilutive to unitholders.To the extent that ENF does not fund portions of the growthcapital, Enbridge will be required until December 31, 2020 to providethe Fund Group with equity financing for such projects, unlessthe project is related to the Line 3 Replacement Program in whichcase Enbridge’s obligation will be to fund the equity requirementsfor such project until it is placed into service.

Changes in Accounting PoliciesAdoption of New Standards

Simplifying the Presentation of Debt Issuance Costs

E�ective January 1, 2016, the Fund adopted Accounting StandardsUpdate (ASU) 2015-03 on a retrospective basis which, as atDecember 31, 2015, resulted in a decrease in Deferred amountsand other assets of $7 million and a corresponding decreasein Long-term debt of $7 million. The new standard requires debtissuance costs related to a recognized debt liability to be presentedin the Statements of Financial Position as a direct deductionfrom the carrying amount of that debt liability, consistent withthe presentation of debt discounts or premiums. Further, e�ectiveJanuary 1, 2016, the Fund adopted ASU 2015-15 which clarifiesthat debt issuance costs associated with line-of-credit arrangementsmay be deferred as an asset and subsequently amortized overthe term of the arrangement. The adoption of ASU 2015-15 didnot have a material impact on the Fund’s financial statements.

Amendments to the Consolidation Analysis

E�ective January 1, 2016, the Fund adopted ASU 2015-02 ona modified retrospective basis, which amended and clarified theguidance on variable interest entities (VIEs). There was a significantchange in the assessment of limited partnerships and other similarlegal entities as VIEs, including the removal of the presumption thatthe general partner should consolidate a limited partnership. As aresult, the Fund has determined that the limited partnership thatis currently equity accounted for is a VIE. The amended guidancedid not impact the Fund’s accounting treatment of the entity, however,material disclosures for VIEs have been provided, as necessary.

Development Stage Entities

E�ective January 1, 2016, the Fund adopted ASU 2014-10, relatingto the amendment eliminating the exception to the su�ciencyof equity at risk criteria for development stage entities ona retrospective basis. The new criteria amended the consolidationguidance to eliminate the development stage entity relief whenapplying the VIE model and evaluating the su�ciency of equityat risk. The adoption of the pronouncement did not have a materialimpact on the Fund’s financial statements.



Clarifying the Definition of a Business in an Acquisition

ASU 2017-01 was issued in January 2017 with the intent of clarifying the definition of a business withthe objective of adding guidance to assist entities with evaluating whether transactions should beaccounted for as acquisitions (disposals) of assets or businesses. The Fund is currently assessingthe impact of the new standard on the financial statements. The accounting update is e�ective for annualand interim periods beginning on or after December 15, 2017 and is to be applied on a prospective basis.

Accounting for Intra-Entity Asset Transfers

ASU 2016-16 was issued in October 2016 with the intent of improving the accounting for the incometax consequences of intra-entity asset transfers other than inventory. Under the new guidance, an entityshould recognize the income tax consequences of an intra-entity transfer of an asset, other than inventory,when the transfer occurs. The selling entity is required to recognize a current tax expense or benefitupon transfer of the asset, whereas the purchasing entity is required to recognize a deferred tax assetor deferred tax liability, as well as the related deferred tax benefit or expense, upon receipt of the asset.The accounting update is e�ective for annual and interim periods beginning on or after December 15, 2017and is to be applied on a modified retrospective basis, with early adoption permitted. E�ective January 1, 2017,the Fund will elect to early adopt ASU 2016-16. The adoption of the pronouncement is not anticipatedto have a material impact on the Fund‘s financial statements.

Simplifying Cash Flow Classification

ASU 2016-15 was issued in August 2016 with the intent of reducing diversity in practice of how certaincash receipts and cash payments are classified in the Statements of Cash Flows. The new guidanceaddresses eight specific presentation issues. The Fund is currently assessing the impact of the newstandard on its financial statements. The accounting update is e�ective for annual and interim periodsbeginning on or after December 15, 2017 and is to be applied on a retrospective basis.

Recognition and Measurement of Financial Assets and Liabilities

ASU 2016-01 was issued in January 2016 with the intent to address certain aspects of recognition,measurement, presentation, and disclosure of financial assets and liabilities. The amendments reviseaccounting related to the classification and measurement of investments in equity securities, thepresentation of certain fair value changes for financial liabilities measured at fair value, and the disclosurerequirements associated with the fair value of financial instruments. The Fund is currently assessing theimpact of the new standard on its financial statements. The accounting update is e�ective for fiscal yearsbeginning after December 15, 2017, and is to be applied by means of a cumulative-e�ect adjustment tothe Statements of Financial Position as of the beginning of the fiscal year of adoption, with amendmentsrelated to equity securities without readily determinable fair values to be applied prospectively.

Fund OwnershipThe following table presents the direct and indirect ownership of the Fund:

As at February 6, 2017

(number Fund Units outstanding)

Held byEnbridge 94,150,000

Held byENF 124,320,723

218,470,723


Management’s ReportTo the Unitholders of Enbridge Income Fund (The Fund)Financial Reporting

The management of Enbridge Management Services Inc. is responsible for the accompanying financialstatements and all related financial information contained in the annual report, including Management’sDiscussion and Analysis. The financial statements have been prepared in accordance with accountingprinciples generally accepted in the United States of America (U.S. GAAP) and necessarily includeamounts that reflect management’s judgment and best estimates.

The Board of Trustees (the Board) and its committees are responsible for all aspects relatedto governance of the Fund. The Audit, Finance & Risk Committee (the AF&RC), composed of trusteeswho are unrelated and independent, has a specific responsibility to oversee management’s e�orts tofulfill its responsibilities for financial reporting and internal controls related thereto. The AF&RC meetswith management, internal auditors and independent auditors to review the financial statements andthe internal controls as they relate to financial reporting. The AF&RC reports its findings to the Boardfor its consideration in approving the financial statements for issuance to the unitholders. The internalauditors and independent auditors have unrestricted access to the AF&RC.

Internal Control Over Financial Reporting

Management is also responsible for establishing and maintaining adequate internal control overfinancial reporting. The Fund’s internal control over financial reporting includes policies and proceduresto facilitate the preparation of relevant, reliable and timely information, to prepare financial statementsfor external reporting purposes in accordance with U.S. GAAP and provide reasonable assurance thatassets are safeguarded.

PricewaterhouseCoopers LLP, independent auditors appointed by the unitholders of the Fund, haveconducted an audit of the financial statements of the Fund in accordance with Canadian generallyaccepted auditing standards and have issued an unqualified audit report, which is accompanyingthe financial statements.

Perry F. Schuldhaus Wanda M. OpheimPresident, Enbridge Income Fund Chief Financial O�cer, Enbridge Income FundEnbridge Management Services Inc. Enbridge Management Services Inc.

February 17, 2017

Enbridge Income Fund Financial Statements 47

Independent Auditor’s ReportTo the Unitholders of Enbridge Income FundWe have audited the accompanying financial statements of Enbridge Income Fund, which comprisethe statements of financial position as at December 31, 2016 and December 31, 2015 and the statementsof earnings, comprehensive income, changes in unitholders’ equity and cash flows for each of the threeyears in the period ended December 31, 2016, and the related notes, which comprise a summaryof significant accounting policies and other explanatory information.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statementsin accordance with generally accepted accounting principles in the United States of America, and forsuch internal control as management determines is necessary to enable the preparation of financialstatements that are free from material misstatement, whether due to fraud or error.


Our responsibility is to express an opinion on these financial statements based on our audits. We conductedour audits in accordance with Canadian generally accepted auditing standards. Those standards requirethat we comply with ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor’s judgment, including the assessmentof the risks of material misstatement of the financial statements, whether due to fraud or error. In makingthose risk assessments, the auditor considers internal control relevant to the entity’s preparation andfair presentation of the financial statements in order to design audit procedures that are appropriatein the circumstances, but not for the purpose of expressing an opinion on the e�ectiveness of the entity’sinternal control. An audit also includes evaluating the appropriateness of accounting policies used andthe reasonableness of accounting estimates made by management, as well as evaluating the overallpresentation of the financial statements.

We believe that the audit evidence we have obtained in our audits is su�cient and appropriate to providea basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial positionof Enbridge Income Fund as at December 31, 2016 and December 31, 2015 and the results of its operationsand its cash flows for each of the three years in the period ended December 31, 2016 in accordance withaccounting principles generally accepted in the United States of America.


February 17, 2017


Statements of EarningsYear endedDecember 31, 2016 20151 20142


Revenues

Transportation andother services – 170 231

Electricity sales – 128 185

– 298 416

Expenses

Operating and administrative 1 61 77

Operating and administrative – a�liate (Note 5) – 57 71

Depreciation and amortization – 94 135

1 212 283

(1) 86 133

Income fromequity investment in EnbridgeCommercial Trust (Note 6) 747 7 –

Income fromother equity investments (Note 8) – 108 140

Other income (Note 12) – 43 12

Other income– a�liates (Note 5) 21 56 6

Interest expense (Note 9) (119) (108) (78)

648 192 213

Income taxes (Note 14) – (72) (63)

Earnings attributable to unitholders 648 120 150


1 Reflects the deconsolidation of Enbridge Commercial Trust and Enbridge Income Partners LP (Note 2).2 Retrospectively adjusted to furnish comparative information related to the 2014 Transaction (Note 2).


Statements of Comprehensive IncomeYear endedDecember 31, 2016 20151 20142


Earnings 648 120 150

Other comprehensive income/(loss), net of tax

Change in unrealized loss on cash flowhedges (42) (41) (26)

Other comprehensive loss fromequity investee (Note 6) (51) (34) –

Reclassification to earnings of realized cash flowhedges (Note 7) 6 4 3

Reclassification to earnings of unrealized cash flowhedges (Note 7) 13 4 –

Change in foreign currency translation adjustment – (9) 5

Other comprehensive loss (74) (76) (18)

Comprehensive incomeattributable to unitholders 574 44 132




Statements of Changes in Unitholders’ EquityYear endedDecember 31, 2016 20151 20142


Deficit

Balance at beginning of year (5,171) (5,752) (2,569)

Earnings attributable to unitholders 648 120 150

EnbridgeCommercial Trust preferred unit distributions – (110) (126)

Distributions to unitholders (454) (213) (114)

Redemption value adjustment attributable toEnbridgeCommercial Trust preferred units (Note 10) – 661 (1,351)

Reversal of cumulative redemption value adjustment attributable toEnbridgeCommercial Trust preferred units (Note 6) – 1,260 –

Redemption value adjustment attributable to trust units (Note 11) (1,436) 1,768 (1,244)

The2015TransactionAdjustments:

Deconsolidation of September 1, 2015 opening retained earnings – 4,718 –

Enbridge IncomePartners LPequity of former owners of acquired interest (Note 6) – (7,259) –

Equity investment other comprehensive loss (Note 6) – (32) –

Other (Note 6) – (16) –

Equity investment dilution loss, net (Note 6) (156) (316) –

Excess purchaseprice over historical carrying value acquired (Note 6) (6) – (392)

Equity of former owners of acquired interest – – (106)

Balance at endof year (6,575) (5,171) (5,752)

Accumulatedother comprehensive loss

Balance at beginning of year (108) (32) (14)

Other comprehensive loss, net of tax (74) (76) (18)

Balance at endof year (182) (108) (32)

Total unitholders’ deficit (6,757) (5,279) (5,784)




Statements of Cash FlowsYear endedDecember 31, 2016 20151 20142



Earnings 648 120 150

Cashdistributions in excess of equity earnings 42 161 11

Depreciation and amortization – 94 135

Deferred income taxes (Note 14) – 54 36

Changes in unrealized derivative instrument fair value, net (Note 7) – 77 25

Unrealized gain on translation ofUnitedStates dollar intercompany loan receivable (Note 12) – (99) (16)

Gain ondisposition of certain assets held byEnbridge IncomePartners LP (Note 12) – (22) –

Other 18 8 8

Changes in operating assets and liabilities (Note 13) 25 116 (26)

733 509 323


Acquisition of long-term investment (Note 6) (718) (3,874) –

A�liate loans, net (203) – –

Cashdivested ondeconsolidation (Note 2) – (118) –

Additions to property, plant andequipment – (34) (40)

Proceeds fromdisposition – 26 –

Long-term receivable froma�liates – 10 (925)

Contributions to equity investees – (5) (6)

Purchaseof equity investment (Note 2) – – (835)

Additions to intangible assets – – (1)

Acquisition andother – – 1

(921) (3,995) (1,806)


Net change in bank indebtedness 1 59 4

Net change in credit facility draws 225 (140) 100

Repayment ofmedium termnotes (330) – (290)

Issuanceofmedium termnotes, net – – 1,075

Loans received froma�liates – 10 891

Repayment of a�liate loans – – (885)

EnbridgeCommercial Trust preferred units issued (Note 10) – – 461

Trust units issued, net (Note 11) 743 3,847 407

EnbridgeCommercial Trust preferred unit distributions declared – (110) (126)

Trust unit distributions declared (454) (213) (114)

Change in distributions payable 9 4 7

Contributions received and shares issuedby acquired interest (Note 2) – – 26

Distributions anddividends paid by acquired interest (Note 2) – – (73)

194 3,457 1,483

Increase/(decrease) in cash andcash equivalents 6 (29) –

Cash and cash equivalents at beginning of year – 29 29

Cash and cash equivalents at endof year 6 – 29


Income taxes paid – 10 28

Interest paid 98 98 69




Statements of Financial PositionDecember 31, 2016 20151


Assets

Current assets

Cash andcash equivalents 6 –

Demandnotes receivable fromEnbridgeCommercial Trust (Note 5) 654 451

Accounts receivable froma�liates (Note 5) 45 72

Other accounts receivable 1 –

Current portion of derivative assets (Note 7) 1 –

Current portion of derivative assets froma�liates (Note 7) 18 22

725 545

Long-termnotes receivable fromEnbridgeCommercial Trust (Note 5) 196 196

Long-term investment (Note 6) 2,244 1,781

Long-termportion of derivative assets (Note 7) – 105

Long-termportion of derivative assets froma�liates (Note 7) 80 –

Deferred amounts andother assets 1 1

3,246 2,628

Liabilities and unitholders’ equity

Current liabilities

Bank indebtedness 1 –

Interest payable 20 20

Current portion of derivative liabilities (Note 7) 23 25

Current portion of derivative liabilities to a�liates (Note 7) 49 17

Other accounts payable 1 1

Distributions payable to a�liates (Note 5) 39 30

Currentmaturities of long-termdebt (Note 9) 325 330

458 423

Long-termdebt (Note 9) 1,969 2,067

Long-termportion of derivative liabilities (Note 7) 127 147

Long-termportion of derivative liabilities to a�liates (Note 7) 4 3

Other long-term liabilities – 1

2,558 2,641

Trust units (Note 11) 7,445 5,266

7,445 5,266

Unitholders’ deficit

Deficit (6,575) (5,171)

Accumulatedother comprehensive loss (182) (108)

(6,757) (5,279)

3,246 2,628


1 Reflects the deconsolidation of Enbridge Commercial Trust and Enbridge Income Partners LP (Note 2).

Approved by the Trustees of Enbridge Commercial Trust on behalf of Enbridge Income Fund:

Bruce G. Waterman E.F.H. RobertsTrustee Trustee

Enbridge Income Fund Notes to the Financial Statements 53

Notes to the Financial Statements1. General Business DescriptionEnbridge Income Fund (the Fund) is an unincorporated open-endedtrust established by a trust indenture under the laws of the Provinceof Alberta. The Fund commenced operations on June 30, 2003.Enbridge Management Services Inc. (EMSI), a wholly-ownedsubsidiary of Enbridge Inc. (Enbridge), manages the Fund. EMSIalso serves as the manager of Enbridge Commercial Trust (ECT),a wholly-owned investment of the Fund, Enbridge Income Partners LP(EIPLP), an indirect investment of the Fund and Enbridge IncomeFund Holdings Inc. (ENF), a unitholder of the Fund. EIPLP isa partnership between ECT and Enbridge. The Fund, ECT, EIPLPand the subsidiaries of EIPLP are referred to as the Fund Group.

The Fund, through its indirect investment in EIPLP, is involvedin the transportation, storage and generation of energy. EIPLP ownsits interests in liquids transportation and storage assets, includingthe Canadian Mainline, the Regional Oil Sands System, a 50%interest in the Canadian and United States portions of the AlliancePipeline, which transports natural gas, and interests in renewablealternative power generation assets.

2. Summary of SignificantAccounting PoliciesBasis of Presentation and Use of Estimates

The financial statements of the Fund have been preparedin accordance with generally accepted accounting principlesin the United States of America (U.S. GAAP). Amounts are statedin Canadian dollars unless otherwise noted.

The Fund is permitted to use U.S. GAAP as its primary basisof accounting for purposes of meeting its continuous disclosureobligations under an exemption granted by securities regulatorsin Canada.

The preparation of financial statements in conformity with U.S. GAAPrequires management to make estimates and assumptions that a�ectthe reported amounts of assets, liabilities, revenues and expensesas well as the disclosure of contingent assets and liabilities in thefinancial statements. Significant estimates and assumptions usedin preparation of the financial statements for the year ended andas at December 31, 2016 include, but are not limited to fair valuesof financial instruments (Note 7).

Significant estimates and assumptions used in preparation of thefinancial statements for the year ended and as at December 31, 2015include, but are not limited to: depreciation rates; amortization ratesof intangible assets; fair values of financial instruments (Note 7) andincome taxes (Note 14). Significant estimates and assumptions usedin the preparation of the financial statements for the year ended

December 31, 2014 include, but are not limited to: carrying valuesof regulatory assets and liabilities; depreciation rates and carryingvalue of property, plant and equipment; measurement of andamortization rates of intangible assets; measurement of goodwill;fair values of financial instruments (Note 7); income taxes (Note 14);and commitments and contingencies.

Actual results could di�er from these estimates.


On September 1, 2015, EIPLP acquired 100% interests in entitiesholding certain Canadian liquids pipelines, storage and renewableenergy assets from Enbridge and certain of its subsidiaries foraggregate consideration of $30.4 billion plus incentive distributionand performance rights and working capital adjustments(the 2015 Transaction).

The 2015 Transaction resulted in changes to the Fund’s methodof accounting for its investments in ECT and EIPLP from consolidationaccounting to the equity method of accounting. These changes wereapplied prospectively from September 1, 2015, the closing date of the2015 Transaction. The results of operations prior to September 1, 2015were accounted for on a consolidated basis.

The significant factors which resulted in the change to theequity method of accounting for each investment upon closingof the 2015 Transaction were:

• Enbridge received a contractual right to control the majorityof the Board of Trustees of ECT. As a result, the Fund ceasedto consolidate ECT as it was no longer the primary beneficiaryof ECT nor did it control ECT.

• As part of the consideration for the 2015 Transaction, EIPLPissued class C units to Enbridge reducing ECT’s ownershippercentage in EIPLP from 100% to 42.8%. Further, Enbridgeacquired a 51% direct interest in the general partner of EIPLPwhich has the right to manage, control and operate thebusinesses of EIPLP. As a result, ECT no longer controls EIPLP.


On November 7, 2014, the Fund completed a transaction wherebyindirect wholly-owned subsidiaries of the Fund acquired fromEnbridge a 50% equity interest in the United States portionof the Alliance Pipeline (Alliance Pipeline US) and subscribedfor and purchased class A units of Enbridge subsidiaries whichprovide a defined cash flow stream from the United States portionof Southern Lights (Southern Lights Class A Units) for $1.8 billion(the 2014 Transaction). At the time of the 2014 Transaction,the Fund previously owned a 50% investment in the Canadianportion of Alliance Pipeline (Alliance Pipeline Canada).


The Alliance Pipeline US component of the 2014 Transaction was accounted for as a transactionamong entities under common control, similar to a pooling of interests, whereby the assets and liabilitiesacquired were recorded at Enbridge’s historic carrying values. Financial information for periods priorto November 7, 2014 has been retrospectively adjusted to present the result of operations for the Fund andits interests in Alliance Pipeline US on a combined basis. The Southern Lights Class A Unit componentof the 2014 Transaction was accounted for as a loan investment and did not require retrospectiverestatement. Subsequent to the close of the 2015 Transaction and deconsolidation, these investmentsare accounted for by the Fund within the indirect equity investment in EIPLP.

The incremental e�ect of retrospectively adjusting the Fund’s financial statements to include the resultsof operations of Alliance Pipeline US for the periods prior to the 2014 Transaction is as follows:

Year endedDecember 31, 2014


Earnings

Income fromequity investments 64

Income taxes (25)

Earnings 39


millions of Canadian dollars)

Cashprovidedbyoperating activities 47

Cash used in financing activities (47)

–

Continuing Accounting Policies

The following accounting policies are primarily applicable for transactions and balances as at andfor the year ended December 31, 2016.


Cash and cash equivalents include short-term investments with a term to maturity of three monthsor less when purchased.

Derivative Instruments and Hedging

Non-qualifying Derivatives

The Fund, through its indirect investment in EIPLP, has non-qualifying derivative instruments.Non-qualifying derivative instruments are used primarily to economically hedge foreign exchangeexposure. Non-qualifying derivatives are measured at fair value with changes in fair value recognizedin earnings, within Electricity sales revenue and Other income.

Derivatives in Qualifying Hedging Relationships

The Fund, and its indirect investee EIPLP, uses derivative financial instruments to manage its exposureto changes in interest rates and commodity prices. Hedge accounting is optional and requires the Fundto document the hedging relationship and test the hedging item’s e�ectiveness in o�setting changesin fair values or cash flows of the underlying hedged item on an ongoing basis. The Fund presentsthe earnings e�ects of hedging items with the hedged transaction. Derivatives in qualifying hedgingrelationships are categorized as cash flow hedges or fair value hedges.


Cash Flow Hedges

The Fund uses cash flow hedges to manage exposureto changes in interest rates, commodity prices and foreignexchange rates. The e�ective portion of the change in the fairvalue of a cash flow hedging instrument is recorded in Othercomprehensive income/(loss) (OCI) and is reclassified toearnings when the hedged item impacts earnings. Any hedgeine�ectiveness is recorded in current period earnings.

If a derivative instrument designated as a cash flow hedgeceases to be e�ective or is terminated, hedge accountingis discontinued and the gain or loss at that date is deferredin OCI and recognized concurrently with the related transaction.If a hedged anticipated transaction is no longer probable, the gainor loss is recognized immediately in earnings. Subsequent gainsand losses from derivative instruments for which hedge accountinghas been discontinued are recognized in earnings in the periodin which they occur.

Classification of Derivatives

The Fund recognizes the fair market value of derivative instrumentson the Statements of Financial Position as current and long-termassets or liabilities depending on the timing of the settlementsand the resulting cash flows associated with the instruments.Fair value amounts related to cash flows occurring beyond oneyear are classified as long-term.

Cash inflows and outflows related to derivative instruments areclassified as operating activities on the Statements of Cash Flows.

Balance Sheet O�set

Assets and liabilities arising from derivative instruments maybe o�set in the Statements of Financial Position when the Fundhas the legal right and intention to settle them on a net basis.

Transaction Costs

Transaction costs are incremental costs directly related tothe acquisition of a financial asset or the issuance of a financialliability. The Fund incurs transaction costs primarily through theissuance of debt and accounts for these costs as a deductionfrom Long-term debt on the Statements of Financial Position.These costs are amortized using the e�ective interest ratemethod over the term of the related debt instrument and arerecorded in Interest expense. Transaction costs directly relatedto business combinations are expensed in the period incurred.

Equity Investments

Equity investments, over which the Fund exercises significantinfluence but does not have controlling financial interests,are accounted for using the equity method. Equity investmentsare initially measured at cost and are adjusted for the Fund’sproportionate share of undistributed equity earnings or loss.Equity investments are increased for contributions madeto and decreased for distributions received from the investees.

As a result of the 2015 Transaction, ECT determines its equityinvestment earnings from EIPLP using the Hypothetical Liquidationat Book Value (HLBV) method. ECT applies the HLBV methodto its equity method investments where cash distributions,including both preference and residual distributions, are not basedon the investor’s ownership percentages. Under the HLBV method,a calculation is prepared at each balance sheet date to determinethe amount that ECT would receive if EIPLP were to liquidate allof its assets, as valued in accordance with U.S. GAAP, and distributethat cash to the investors. The di�erence between the calculatedliquidation distribution amounts at the beginning and the endof the reporting period, after adjusting for capital contributionsand distributions, is ECT’s share of the earnings or losses fromthe equity investment for the period. See the Long-term investmentnote (Note 6) for more information.

Income Taxes

Pursuant to the Income Tax Act (Canada), the Fund, as a trust,is not subject to income taxes to the extent that taxable incomeand taxable capital gains are paid or payable to unitholders.Deferred income taxes have not been recognized because it isanticipated that all future earnings will be paid or payable to unitholders.

Impairment

With respect to equity investments, the Fund assesses at eachbalance sheet date whether there is objective evidence that afinancial asset is impaired by completing a quantitative or qualitativeanalysis of factors impacting the investment. If there is determinedto be objective evidence of impairment, the Fund internally valuesthe expected discounted cash flows using observable marketinputs and determines whether the decline below carrying valueis other than temporary. If the decline is determined to be otherthan temporary, an impairment charge is recorded in earningswith an o�setting reduction to the carrying value of the asset.

With respect to financial assets, other than equity investments,the Fund assesses the assets for impairment when it no longerhas reasonable assurance of timely collection. If evidenceof impairment is noted, the Fund reduces the value of thefinancial asset to its estimated realizable amount, determinedusing discounted expected future cash flows.



Long-term notes receivable from a�liate are measured at amortizedcost using the e�ective interest rate method, net of any impairmentlosses recognized. Accounts receivable and other are measuredat cost. Interest income is recognized in earnings as it is earnedwith the passage of time.

Deferred Amounts and Other Assets

Deferred amounts and other assets primarily include derivativefinancial instruments.

Redeemable Securities – Trust Units

Ordinary trust units issued by the Fund (Fund Units) are classifiedas temporary equity and reflected within the mezzanine sectionof the Statements of Financial Position between long-term liabilitiesand Unitholders’ deficit. Fund Units are recorded at their maximumredemption value with changes in estimated redemption valuereflected as a charge or credit to deficit.

Principles of Consolidation

Upon inception of a contractual agreement, the Fund performsan assessment to determine whether the arrangement containsa variable interest in a legal entity and whether that legal entityis a variable interest entity (VIE). Where the Fund concludesit is the primary beneficiary of a VIE, the Fund consolidatesthe accounts of that entity and all significant intercompanyaccounts and transactions are eliminated upon consolidation.

Commitments and Contingencies

Liabilities for commitments and contingencies are recognized when,after fully analysing available information, the Fund determines it iseither probable that an asset has been impaired, or that a liability hasbeen incurred, and the amount of impairment or loss can be reasonablyestimated. When a range of probable loss can be estimated, the Fundrecognizes the most likely amount, or if no amount is more likelythan another, the minimum of the range of probable loss is accrued.The Fund expenses legal costs associated with loss contingenciesas such costs are incurred. At December 31, 2016, the Fund did nothave any significant commitments or known contingencies.

Comparative Period Accounting Policies

The following accounting policies are primarily applicable fortransactions prior to the 2015 Transaction on September 1, 2015and for transactions for the year ended December 31, 2014.

Revenue Recognition

Revenues from business operations in EIPLP and ECT prior to theclosing of the 2015 Transaction on September 1, 2015 were accountedfor on a consolidated basis. Subsequent to September 1, 2015,revenues from business operations in EIPLP and ECT are recordedwithin the Fund’s equity accounting for its indirect investmentin EIPLP.

For the Fund Group’s businesses that are not rate-regulated,revenues were recorded when products were delivered or serviceswere performed, the amount of revenue was reliably measured andcollectability was reasonably assured. Customer credit worthinesswas assessed prior to agreement signing as well as throughout the

contract duration. Certain pipelines revenues were recognizedunder the terms of committed delivery contracts rather thanthe cash tolls received.

Long-term take-or-pay contracts, under which shippers areobligated to pay fixed amounts rateably over the contract periodregardless of volumes shipped, may contain make-up rights.Make-up rights are earned by shippers when minimum volumecommitments are not utilized during the period but under certaincircumstances can be used to o�set overages in future periods,subject to expiry periods. The Fund recognized revenues associatedwith make-up rights at the earlier of when the make-up volume wasshipped, the make-up right expired or when it was determined thatthe likelihood that the shipper will utilize the make-up right was remote.

For the Fund Group’s rate-regulated businesses, revenues wererecognized in a manner that was consistent with the underlyingagreements as approved by the regulators.

Regulation

Prior to the closing of the 2015 Transaction on September 1, 2015,the financial statement e�ect of rate regulation was recordeddirectly in the Fund and subsequent to September 1, 2015, thefinancial statement e�ect of rate regulation is recorded withinthe Fund’s equity accounting for its indirect investment in EIPLP.

Certain of the Fund Group’s businesses are subject to regulationby various authorities including, but not limited to the NationalEnergy Board (NEB), Federal Energy Regulatory Commission (FERC),Saskatchewan Ministry of Economy (SME) and Manitoba MineralResources. Regulatory bodies exercise statutory authority overmatters such as construction, rates and ratemaking and agreementswith customers. To recognize the economic e�ects of the actionsof the regulator, the timing of recognition of certain revenuesand expenses in these operations may di�er from that otherwiseexpected under U.S. GAAP for non rate-regulated entities.

Regulatory assets represent amounts that are expectedto be recovered from customers in future periods through rates.Regulatory liabilities represent amounts that are expected to berefunded to customers in future periods through rates or expectedto be paid to cover future abandonment costs in relation to NEB’sLand Matters Consultation Initiative (LMCI). Long-term regulatoryassets were recorded in Deferred amounts and other assets andcurrent regulatory assets were recorded in Accounts receivableand other. Long-term regulatory liabilities were included in Otherlong-term liabilities and current regulatory liabilities were recordedin Accounts payable and other. Regulatory assets were assessedfor impairment if the Fund identified an event indicative of possibleimpairment. The recognition of regulatory assets and liabilities isbased on the actions, or expected future actions of the regulator.To the extent that the regulator’s actions di�er from the Fund’sexpectations, the timing and amount of recovery or settlementof regulatory balances could have di�ered significantly from thoserecorded. In the absence of rate regulation, regulatory assetsor liabilities would not generally be recognized and the earningsimpact would be recorded in the period the expenses are incurred orrevenues are earned. A regulatory asset or liability was recognized inrespect of deferred income taxes when it was expected the amountswould be recovered or settled through future regulator-approved rates.


Allowance for funds used during construction (AFUDC) was includedin the cost of property, plant and equipment and is depreciatedover future periods as part of the total cost of the related asset.AFUDC included both an interest component and, if approvedby the regulator, a cost of equity component which were bothcapitalized based on rates set out in a regulatory agreement.In the absence of rate regulation, the Fund would have capitalizedinterest using a capitalization rate based on its cost of borrowing,whereas the capitalized equity component, the correspondingearnings during the construction phase and the subsequentdepreciation would not be recognized.

Income Taxes

Pursuant to the Income Tax Act (Canada), the Fund and ECT,as trusts, are not subject to income taxes to the extent that taxableincome and taxable capital gains are paid or payable to unitholders.However, certain previously consolidated subsidiary corporationsare taxable and applicable income taxes have been reflected inthese financial statements for the periods prior to September 1, 2015.

Following the liability method of accounting for income taxes,deferred income tax assets and liabilities were recorded basedon temporary di�erences between the tax bases of assetsand liabilities and their carrying value for accounting purposes.Deferred income tax assets and liabilities were measuredusing the tax rate that is expected to apply when the temporarydi�erences reverse. For the Fund’s previously consolidatedregulated operations, a deferred income tax liability was recognizedwith a corresponding regulatory asset to the extent taxes couldbe recovered through rates. Interest and penalties related to taxare reflected in income taxes.

Foreign Currency Transactions and Translation

Foreign currency transactions are those transactions whose termsare denominated in a currency other than the currency of theprimary economic environment in which the Fund or a previouslyconsolidated subsidiary operates, referred to as the functionalcurrency. Transactions denominated in foreign currencies aretranslated into the functional currency using the exchange rateprevailing at the date of transaction. Monetary assets and liabilitiesdenominated in foreign currencies are translated to the functionalcurrency using the rate of exchange in e�ect at the balancesheet date. Exchange gains and losses resulting from translationof monetary assets and liabilities are included in the Statementsof Earnings in the period in which they arise.

Gains and losses arising from translation of a foreign operation’sfunctional currency to the Fund’s Canadian dollar presentationcurrency were included in the cumulative translation adjustmentcomponent of accumulated other comprehensive income (AOCI)and would have been recognized in earnings upon sale of theforeign operation. Asset and liability accounts were translatedat the exchange rates in e�ect on the balance sheet date, whilerevenues and expenses were translated using monthly averageexchange rates.

Deferred Amounts

Deferred amounts and other assets in the prior year also includedcosts which regulatory authorities have permitted, or were expectedto permit, to be recovered through future rates including deferredincome taxes.

Property, Plant and Equipment

Property, plant and equipment was recorded at historical cost.Expenditures for construction, expansion, major renewals andbetterments were capitalized. Maintenance and repair costs wereexpensed as incurred. Expenditures for project development werecapitalized if they were expected to have future benefit. The Fundcapitalized interest incurred during construction.

Two primary methods of depreciation were utilized. For distinctassets, depreciation was generally provided on a straight-line basisover the estimated useful lives of the assets commencing whenthe asset was placed in service. For largely homogeneous groups ofassets with comparable useful lives, the pool method of accountingfor property, plant and equipment was followed whereby similarassets are grouped and depreciated as a pool. When those assetswere retired or otherwise disposed of, gains and losses were bookedas an adjustment to accumulated depreciation. Certain pipelineassets in service were depreciated based on unit of throughput.

Intangible Assets

Intangible assets consisted primarily of acquired power productionand incentive agreements for wind and solar projects and computersoftware. The Fund capitalized costs incurred during the developmentstage of internal use software projects. Intangible assets wereamortized on a straight-line basis over their expected lives.

Goodwill

Goodwill represents the excess of the purchase price over thefair value of net identifiable assets on acquisition of a business.The carrying value of goodwill, which is not amortized, is assessedfor impairment annually, or more frequently if events or changesin circumstances arise that suggest the carrying value of goodwillmay be impaired. The Fund did not have any goodwill as atDecember 31, 2015 and did not recognize any goodwill impairmentsfor the eight month period prior to September 1, 2015 and the yearended December 31, 2014.

Asset Retirement Obligations

Asset retirement obligations (ARO) associated with the retirementof long-lived assets are measured at fair value and recognizedas other long-term liabilities in the period in which they can bereasonably determined. The fair value approximates the cost a thirdparty would charge to perform the tasks necessary to retire suchassets and is recognized at the present value of expected futurecash flows. ARO are added to the carrying value of the associatedasset and depreciated over the asset’s useful life. The correspondingliability is accreted over time through charges to earnings andis reduced by actual costs of decommissioning and reclamation.


For the majority of the assets within the indirect investmentsof the Fund, it is not possible to make a reasonable estimate of AROdue to the indeterminate timing and scope of the asset retirements.

Redeemable Securities – ECT preferred units

Prior to the 2015 Transaction, preferred units issued by ECT(ECT Preferred Units) were classified as temporary equity andreflected within the mezzanine section of the Statements ofFinancial Position between long-term liabilities and Unitholders’deficit. ECT Preferred Units were recorded at their maximumredemption value with changes in estimated redemption valuereflected as a charge or credit to deficit.

3. Changes in Accounting PoliciesAdoption of New Standards


E�ective January 1, 2016, the Fund adopted Accounting StandardsUpdate (ASU) 2015-03 on a retrospective basis which, as atDecember 31, 2015, resulted in a decrease in Deferred amountsand other assets of $7 million and a corresponding decreasein Long-term debt of $7 million. The new standard requires debtissuance costs related to a recognized debt liability to be presentedin the Statements of Financial Position as a direct deduction from thecarrying amount of that debt liability, consistent with the presentationof debt discounts or premiums. Further, e�ective January 1, 2016,the Fund adopted ASU 2015-15 which clarifies that debt issuancecosts associated with line-of-credit arrangements may be deferredas an asset and subsequently amortized over the term of thearrangement. The adoption of ASU 2015-15 did not have a materialimpact on the Fund’s financial statements.


E�ective January 1, 2016, the Fund adopted ASU 2015-02 ona modified retrospective basis, which amended and clarified theguidance on VIEs. There was a significant change in the assessmentof limited partnerships and other similar legal entities as VIEs,including the removal of the presumption that the general partnershould consolidate a limited partnership. As a result, the Fundhas determined that the limited partnership that is currently equityaccounted for is a VIE. The amended guidance did not impactthe Fund’s accounting treatment of the entity, however, materialdisclosures for VIEs have been provided, as necessary.


E�ective January 1, 2016, the Fund adopted ASU 2014-10,relating to the amendment eliminating the exception to thesu�ciency of equity at risk criteria for development stage entitieson a retrospective basis. The new criteria amended the consolidationguidance to eliminate the development stage entity relief whenapplying the VIE model and evaluating the su�ciency of equityat risk. The adoption of the pronouncement did not have a materialimpact on the Fund’s financial statements.



ASU 2017-01 was issued in January 2017 with the intent of clarifyingthe definition of a business with the objective of adding guidanceto assist entities with evaluating whether transactions should beaccounted for as acquisitions (disposals) of assets or businesses.The Fund is currently assessing the impact of the new standardon the financial statements. The accounting update is e�ective forannual and interim periods beginning on or after December 15, 2017and is to be applied on a prospective basis.


ASU 2016-16 was issued in October 2016 with the intent of improvingthe accounting for the income tax consequences of intra-entity assettransfers other than inventory. Under the new guidance, an entityshould recognize the income tax consequences of an intra-entitytransfer of an asset, other than inventory, when the transfer occurs.The selling entity is required to recognize a current tax expenseor benefit upon transfer of the asset, whereas the purchasing entityis required to recognize a deferred tax asset or deferred tax liability,as well as the related deferred tax benefit or expense, upon receiptof the asset. The accounting update is e�ective for annual andinterim periods beginning on or after December 15, 2017 and isto be applied on a modified retrospective basis, with early adoptionpermitted. E�ective January 1, 2017, the Fund will elect to early adoptASU 2016-16. The adoption of the pronouncement is not anticipatedto have a material impact on the Fund‘s financial statements.


ASU 2016-15 was issued in August 2016 with the intent of reducingdiversity in practice of how certain cash receipts and cash paymentsare classified in the Statements of Cash Flows. The new guidanceaddresses eight specific presentation issues. The Fund is currentlyassessing the impact of the new standard on its financial statements.The accounting update is e�ective for annual and interim periodsbeginning on or after December 15, 2017 and is to be applied ona retrospective basis.

Recognition and Measurement of Financial Assetsand Liabilities

ASU 2016-01 was issued in January 2016 with the intent to addresscertain aspects of recognition, measurement, presentation, anddisclosure of financial assets and liabilities. The amendmentsrevise accounting related to the classification and measurementof investments in equity securities, the presentation of certain fairvalue changes for financial liabilities measured at fair value, and thedisclosure requirements associated with the fair value of financialinstruments. The Fund is currently assessing the impact of thenew standard on its financial statements. The accounting updateis e�ective for fiscal years beginning after December 15, 2017,and is to be applied by means of a cumulative-e�ect adjustmentto the Statements of Financial Position as of the beginning of thefiscal year of adoption, with amendments related to equity securitieswithout readily determinable fair values to be applied prospectively.


4. Segmented InformationThe changes in accounting resulting from the 2015 Transaction (Note 2) have been applied on a prospectivebasis and result in the Fund having one operating segment subsequent to September 1, 2015. Prior to thisdate, the Fund had four operating segments: Liquids Transportation and Storage, Natural Gas Transmission,Green Power and Corporate.

5. Related Party TransactionsUnless otherwise noted, all related party transactions have been measured at the exchange amountof consideration established and agreed to by the related parties. The 2015 Transaction and the 2014Transaction were accounted for as transactions among entities under common control. See Note 2for additional information.

As a result of the 2015 Transaction (Note 2), the majority of the Fund’s a�liate balances are with ECT.Previously, these balances were eliminated on consolidation.

Demand Notes Receivable from Enbridge Commercial Trust

December 31, 2016 2015


Non-interest bearing note, due ondemand fromECT – 303

Floating interest rate note, due ondemand fromECT 654 148

654 451

For the year ended December 31, 2016, Other income – a�liates included interest income of $8 million(2015 – $1 million) related to the floating interest rate note payable from ECT. Both the non-interestbearing note receivable and the floating interest rate note receivable are due on demand.

Accounts Receivable from A�liates

December 31, 2016 2015


Distributions receivable fromECT 43 44

Accounts receivable fromECT 2 13

Accounts receivable fromEPI – 12

Other accounts receivable froma�liates – 3

45 72

For the year ended December 31, 2016, the Fund’s investment in ECT reflects $789 million of distributions(2015 – $168 million) and $718 million of contributions (2015 – $3,874 million) (Note 6).

For the year ended December 31, 2015 and 2014, Other income – a�liates included $51 million and $6 million,respectively, of interest income related to the Southern Lights Class A Units long-term receivable whichwere subscribed for and purchased as part of the 2014 Transaction (Note 2).

Long-term Notes Receivable from Enbridge Commercial Trust

December 31, 2016 2015


5.69%due June22, 2017 fromECT1 96 96

7.00%dueNovember 12, 2020 fromECT 100 100

196 196

1 This note receivable has been classified as non-current on the Statements of Financial Position as the maturity date is expected to be extended prior to maturity.

For the year ended December 31, 2016, Other income – a�liates included $13 million (2015 – $4 million)of interest income related to the long-term notes receivable from ECT.


Distributions Payable to A�liates

As at December 31, 2016, Distributions payable to a�liatesincluded Fund Unit distributions payable to ENF of $22 million(2015 – $15 million) and to Enbridge of $17 million (2015 – $15 million).

Due to A�liates

Under the management and administrative agreements with EMSI,an incentive fee is payable annually from ECT to EMSI based oncash distributions above a base distribution level. For the year endedDecember 31, 2016, no incentive fees were recorded as the Fundno longer consolidates ECT. Prior to September 1, 2015, the resultsof ECT’s operations were accounted for on a consolidated basisand incentive fees of $23 million were recorded within Operatingand administrative expense – a�liate on the Statements of Earningsfor both the years ended December 31, 2015 and 2014.

The Fund does not have any employees and prior to September 1, 2015,wholly-owned subsidiaries of the Fund used the services of Enbridgefor managing and operating the businesses. For the year endedDecember 31, 2016, no service fees were recorded as the Fundno longer consolidates ECT. Prior to September 1, 2015, the resultsof operations from the Fund’s wholly-owned subsidiaries wereaccounted for on a consolidated basis and the service feesof $34 million and $48 million were recorded for the years endedDecember 31, 2015 and 2014, respectively, were recorded withinOperating and administrative expense – a�liate on the Statementsof Earnings.

These services were charged at cost in accordance with theservice agreements.

Other A�liate Transactions

During 2016, the Fund paid $24 million (2015 – $28 million;2014 – $14 million) for share issue costs incurred in connection withthe public o�ering of 20.4 million common shares (2015 – 21.5 millioncommon shares; 2014 – 11 million subscription receipts) by ENF (Note 11).

On September 1, 2015, the Fund entered into interest ratederivative instrument agreements with Enbridge to limit the FundGroup’s exposure to interest rate fluctuations in addition to itspre-existing external agreements. The Fund also had existingforeign exchange derivative instrument agreements with externalcounterparties and o�setting foreign exchange derivativeinstrument agreements with a wholly-owned subsidiary of EIPLP.The net a�liate derivative instrument balance was $45 millionasset (2015 – $2 million asset) (Note 7).

In November 2014, the Fund received an $878 million loanfrom Enbridge, a related party by virtue of its ownership of ECTPreferred Units and Fund Units, to partially finance the purchaseof Southern Lights Class A Units and Alliance Pipeline US (Note 2).Interest expense on this loan of $2 million was incurred by the Fundfor the year ended December 31, 2014 and had been paid in fullas at December 31, 2014. The subscription price for the SouthernLights Class A Units was at a fixed exchange rate of Canadian dollarsto the United States dollar price. Given exchange rates on the dateof closing, the Fund recorded a realized foreign exchange gainof $22 million in the fourth quarter 2014.

6. Long-Term InvestmentInvestment in Enbridge Commercial Trust

ECT is a VIE as the holders of the common units of ECT lackdecision making abilities. Enbridge has the power to make decisionswhich impact ECT’s performance and therefore, the Fund is notconsidered the primary beneficiary of ECT and equity accountsfor its investment in ECT.

As at December 31, 2016, the Fund’s maximum exposure to lossis limited to the carrying amount of its equity investment in ECT,which is $ 2,244 million (2015 – $1,781 million). ECT’s assetsconsist primarily of an equity investment in EIPLP and a�liatereceivables. ECT’s liabilities are primarily comprised of preferredunits of ECT (ECT Preferred Units), held by Enbridge, and a�liateloans. As at December 31, 2016, the carrying value of ECT’sassets was $4,764 million and the carrying value of its liabilitieswas $2,520 million.


Further upon closing of the 2015 Transaction, the ECT Preferred Units were reclassified from mezzanineequity to liabilities. Accordingly, ECT reduced the recorded redemption value of its Preferred Unitsto their aggregate par value amount of $1,578 million with the di�erence recorded to Unitholders’ equity.Consequently, the Fund’s long-term investment in ECT was increased by $1,260 million representingthe di�erence between the September 1, 2015 ECT Preferred Unit redemption amount and the ECTaggregate par value.

December 31, 2016 2015


Investment balance at beginning of period1 1,781 1,568

Investment acquired 718 3,874

Reversal of redemption value adjustment attributable toECTPreferredUnits – 1,260

The2015Transaction adjustments:

Equity true-up –September 1, 2015 – 2,866

EIPLP’s excess purchaseprice over historical carrying value acquired (6) (7,259)

Equity investment other comprehensive loss – (32)

Other – (16)

Equity investment income 747 7

Equity investment other comprehensive loss (51) (3)

Equity investment dilution loss, net (156) (316)

Distributions2 (789) (168)

Investment balance at endof year 2,244 1,781

1 Opening balance for 2015 as at September 1, 2015, following the change in accounting of ECT from consolidation to equity method accounting.2 Subsequent to the sale of EIPLP’s South Prairie Region assets in December 2016, EIPLP made a special one-time distribution to ECT utilizing proceeds from the sale, which in turn

was paid from ECT to the Fund and is included in distributions.

As at December 31, 2016, the Fund owned 306 million (2015 – 280 million) units of ECT, representingall of ECT’s issued and outstanding common units. Prior to September 1, 2015, ECT was a subsidiaryof the Fund and was consolidated (Note 2).

In September 2015, the Fund used the aggregate proceeds of $3 billion from the issuance of Fund Unitsto Enbridge to purchase additional common units of ECT. ECT used the aggregate proceeds of $3 billionto purchase additional class A units issued by EIPLP (EIPLP Class A Units).

In November 2015, the Fund used the aggregate proceeds of $874 million from the issuance of FundUnits to ENF to purchase additional common units of ECT, and ECT used the aggregate proceedsof $874 million to purchase additional EIPLP Class A Units.

Indirect Investment in EIPLP

EIPLP is considered a VIE as its limited partners lack substantive kick-out rights and participatingrights. As the Fund does not have the power to direct the activities that most significantly impactEIPLP’s economic performance, the Fund is not considered the primary beneficiary of EIPLP.

As the Fund does not directly own an interest in EIPLP, its maximum exposure to loss equates to itsindirect investment in EIPLP through the ownership of ECT. At December 31, 2016, the Fund, throughits 100% ownership of ECT, owned 382 million (2015 – 357 million) of the issued and outstanding EIPLPClass A Units, representing an indirect ownership of 45.8% (2015 – 44.5%) of EIPLP’s total issued andoutstanding common units.


The following table represents ECT’s investment in EIPLP:

December 31, 2016 2015


Investment balance at beginning of period1 3,902 3,086

Investment acquired 718 3,874

The2015Transaction adjustments:

Equity true-up –September 1, 2015 – 4,687

EIPLP’s excess purchaseprice over historical carrying value acquired (6) (7,259)

Equity investment other comprehensive loss – (32)

Other – (16)

Equity investment income 1,068 104

Equity investment other comprehensive loss (51) (3)

Equity investment dilution loss, net (156) (316)

Distributions2 (1,115) (223)

Investment balance at endof year 4,360 3,902

1 Opening balance for 2015 as at September 1, 2015, following the change in accounting of ECT from consolidation to equity method accounting.2 Subsequent to the sale of EIPLP’s South Prairie Region assets in December 2016, EIPLP made a special one-time distribution to ECT utilizing proceeds from the sale.

Equity issuances from EIPLP result in dilution gains or losses, with a corresponding charge or creditto deficit, when each of EIPLP’s partners do not participate equally in the issuance. For the year endedDecember 31, 2016, ECT recorded a net dilution loss of $156 million (2015 – $316 million loss) resultingfrom its increase in ownership of EIPLP Class A Units partially o�set by EIPLP’s issuance of Class D Unitsto Enbridge. ECT’s net dilution loss is recorded as a component of the Fund’s equity pickup of ECT.

Summarized financial information of EIPLP accounted for under the equity method was as follows:



Revenues 3,922 1,874 2,186

Earnings 2,297 180 631

1 Retrospectively adjusted to furnish comparative information related to the 2015 and 2014 Transactions (Note 2).

December 31, 2016 2015


Current assets 888 794

Property, plant and equipment, net 22,455 21,064

Other long-termassets 3,919 3,792

Current liabilities 2,174 1,928

Long-termdebt 6,043 5,591

Other long-term liabilities 9,514 9,368


Financial Statement E�ects of Rate Regulation

The financial statement e�ect of rate regulation is recorded withinthe Fund’s equity accounting for its indirect investment in EIPLP.The Canadian Mainline and Southern Lights Pipeline businesseswithin EIPLP are subject to regulation by the National Energy Board(NEB). EIPLP also collects and sets aside funds to cover futurepipeline abandonment costs for all NEB regulated pipelines as aresult of the NEB’s regulatory requirements under the NEB’s LandMatters Consultation Initiative. Amounts expected to be paid to coverfuture abandonment costs are recognized as long-term regulatoryliabilities. EIPLP’s significant regulated businesses and other relatedaccounting impacts are described below.

Canadian Mainline

Canadian Mainline includes the Canadian portion of the mainlinesystem and is subject to regulation by the NEB. Canadian Mainlinetolls (excluding Lines 8 and 9) are currently governed by the 10-yearCTS, which establishes a Canadian Local Toll for all volumes shippedon the Canadian Mainline and an International Joint Tari� for allvolumes shipped from western Canadian receipt points to deliverypoints on Enbridge’s Lakehead System and delivery points on theCanadian Mainline downstream of the Lakehead System. The CTSwas negotiated with shippers in accordance with NEB guidelines,was approved by the NEB in June 2011 and took e�ect July 1, 2011.Under the CTS, a regulatory asset is recognized to o�set deferredincome taxes as a NEB rate order governing flow-through incometax treatment permits future recovery. No other material regulatoryassets or liabilities are recognized under the terms of the CTS.

Southern Lights Pipeline

Southern Lights Canada is regulated by the NEB. Shippers onSouthern Lights Canada are subject to long-term transportationcontracts under a cost of service toll methodology. Toll adjustmentsare filed annually with the NEB.

Saskatchewan Gathering System

The Saskatchewan Gathering System is regulated by theSaskatchewan Ministry of Economy. The Saskatchewan GatheringSystem follows a cost of service methodology. In May 2016, EIPLPreached a Settlement Agreement (the Settlement) with a groupof shippers that revised the tolling methodology on the SaskatchewanGathering System. The regulatory governance of the Settlementchanged and as such, all of the criteria required for the continuedapplication of rate-regulated accounting treatment were no longermet and derecognition of regulatory balances as at May 1, 2016was required.

On December 1, 2016, EIPLP disposed of the SaskatchewanGathering System as part of the sale of the South PrairieRegion assets.

Alliance Pipeline

Alliance Pipeline Canada has tolls and tari�s regulated by the NEBand Alliance Pipeline US has tolls and tari�s regulated by the FERC.With the expiration of Alliance Pipeline’s transportation serviceagreements in December 2015, Alliance Pipeline announced a newservices framework and the related tolls and tari� provisions requiredto implement the new services (collectively, New Services Framework).Pursuant to the New Services Framework, Alliance Pipeline retainsexposure to potential variability in certain future costs and throughputvolumes. As such, the majority of Alliance Pipeline’s operations nolonger meet all of the criteria required for the continued applicationof rate-regulated accounting treatment and derecognitionof regulatory balances as at June 30, 2015 was required.

7. Derivative Financial Instrumentsand Hedging ActivitiesInterest Rate Risk

The Fund’s earnings, cash flows and OCI are exposed to shortterm interest rate variability due to the regular repricing of itsvariable rate debt, primarily credit facilities. Floating to fixed interestrate swaps are used to hedge against the e�ect of future interestrate movements. The Fund has implemented a program to mitigatethe volatility of short-term interest rates on interest expensewith the execution of floating to fixed rate interest rate swapsat an average swap rate of 2.5%.

The Fund’s earnings, cash flows and OCI are also exposed tovariability in longer term interest rates ahead of anticipated fixedrate debt issuances. Forward starting interest rate swaps may beused to hedge against the e�ect of future interest rate movements.The Fund has implemented a program to mitigate its exposureto long-term interest rate variability on select forecast term debtissuances with the execution of floating to fixed interest rateswaps at an average swap rate of 3.1%.

The Fund uses qualifying derivative instruments to manageinterest rate risk.


Total Derivative Instruments

The following table summarizes the Statements of Financial Position location and carrying valueof the Fund’s derivative instruments. The Fund did not have any outstanding fair value hedgesas at December 31, 2016 or 2015.

The Fund generally has a policy of entering into individual International Swaps and DerivativesAssociation, Inc. agreements, or other similar derivative agreements, with the majority of its derivativecounterparties. These agreements provide for the net settlement of derivative instruments outstandingwith specific counterparties in the event of bankruptcy or other significant credit event, and wouldreduce the Fund’s credit risk exposure on derivative asset positions outstanding with the counterpartiesin these particular circumstances. The following table also summarizes the maximum potentialsettlement in the event of these specific circumstances. All amounts are presented gross inthe Statements of Financial Position.

December 31, 2016

DerivativeInstruments

used as CashFlow Hedges

Non–QualifyingDerivative

Instruments

Total GrossDerivative

Instrumentsas Presented

AmountsAvailable

for O�set

Total NetDerivative

Instruments


Current portion of derivative assets

Foreign exchange contracts – 1 1 – 1

– 1 1 – 1

Current portion of derivative assets – a�liates

Foreign exchange contracts – 18 18 (1) 17

– 18 18 (1) 17

Long-termportion of derivative assets – a�liates


– 80 80 – 80

Current portion of derivative liabilities

Interest rate contracts (5) – (5) – (5)

Foreign exchange contracts – (18) (18) – (18)

(5) (18) (23) – (23)

Current portion of derivative liabilities – a�liates


Foreign exchange contracts – (1) (1) 1 –

(48) (1) (49) 1 (48)

Long-termportion of derivative liabilities



(47) (80) (127) – (127)

Long-termportion of derivative liabilities – a�liates


(4) – (4) – (4)

Total net derivative liability


Foreign exchange contracts – – – – –

(104) – (104) – (104)


December 31, 2015


used as CashFlow Hedges


Instruments



AmountsAvailable

for O�set

Total NetDerivative

Instruments


Current portion of derivative assets – a�liates


– 22 22 – 22

Long-termportion of derivative assets


– 105 105 – 105

Current portion of derivative liabilities



(3) (22) (25) – (25)

Current portion of derivative liabilities – a�liates


(17) – (17) – (17)

Long-termportion of derivative liabilities



(42) (105) (147) – (147)

Long-termportion of derivative liabilities – a�liates


(3) – (3) – (3)

Total net derivative liability


Foreign exchange contracts – – – – –

(65) – (65) – (65)

The following table summarizes the maturity and notional principal or quantity outstanding relatedto the Fund’s derivative instruments.

December 31, 2016 2017 2018 2019 2020 2021 Thereafter

Interest rate contracts – short-termborrowings (millions of Canadian dollars) 326 319 1 – – –

Interest rate contracts – long-termborrowings (millions of Canadian dollars) 800 350 – – – –Foreign exchange contracts –UnitedStates dollar forwards – purchase

(millions of United States dollars) 99 92 57 63 69 222Foreign exchange contracts –UnitedStates dollar forwards – sell

(millions of United States dollars) 99 92 57 63 69 222


Interest rate contracts – short-termborrowings (millions of Canadian dollars) 301 326 319 1 – –

Interest rate contracts – long-termborrowings (millions of Canadian dollars) 720 330 100 – – –

Foreign exchange contracts –UnitedStates dollar forwards – purchase(millions of United States dollars) 87 86 86 57 63 291

Foreign exchange contracts –UnitedStates dollar forwards – sell(millions of United States dollars) 87 86 86 57 63 291


E�ect of Derivative Instruments on the Statements of Earnings and Comprehensive Income

The following table presents the e�ect of cash flow hedges on the Fund’s earningsand comprehensive income.




Interest rate contracts (44) (43) (29)


Commodity contracts – 1 3

Total unrealized loss recognized inOCI (44) (40) (25)

Amount of (gains)/loss reclassified fromAOCI to earnings (e�ective portion)


Commodity contracts2 – (1) (1)

Total loss reclassified fromAOCI to earnings (e�ective portion) 6 4 3

Amount of loss reclassifieddue to change to equity accounting

Foreign exchange contracts – (3) –

Commodity contracts – (2) –

Total loss reclassifieddue to change to equity accounting – (5) –

Amount of loss reclassified fromAOCI to earnings (ine�ective portion and amount excluded from e�ectiveness testing)

Interest rate contracts1 13 4 –

1 Reported within Interest expense in the Statements of Earnings.2 Reported within Electricity sales revenues in the Statements of Earnings.

The estimated net amount of existing losses reported in AOCI that is expected to be reclassifiedto net income within the next 12 months is $8 million. Actual amounts reclassified to earnings dependon the interest rates in e�ect when derivative contracts that are currently outstanding are settled.

Non-Qualifying Derivatives

The following table presents the unrealized gains and losses associated with changes in the fair valueof the Fund’s non-qualifying derivatives.



Foreign exchange contracts1 – (77) (25)

Total unrealized derivative fair value loss – (77) (25)

1 Reported within Other income in the Statements of Earnings.

Liquidity Risk

Liquidity risk is the risk that the Fund will not be able to meet its financial obligations, includingcommitments, as they become due. In order to manage this risk, the Fund forecasts the cashrequirements over the near and long term to determine whether su�cient funds will be availablewhen required. The Fund’s primary sources of liquidity and capital resources are funds generated fromits indirect investment in EIPLP, draws under committed credit facilities and the issuance of mediumterm notes (MTNs) and the issuance of Fund Units. The Fund expects to file a current MTN shelfprospectus with Canadian securities regulators in the first quarter of 2017, which will enable, subjectto market conditions, ready access to Canadian public capital markets. Additional liquidity, if necessary,is expected to be available through intercompany transactions with Enbridge or other related entities.


Credit Risk

Entering into derivative financial instruments may result in exposure to credit risk. Credit risk arises fromthe possibility that a counterparty will default on its contractual obligations. The Fund enters into riskmanagement transactions only with institutions that possess investment grade credit ratings. Credit riskrelating to derivative counterparties is mitigated by credit exposure limits and contractual requirements,netting arrangements and ongoing monitoring of counterparty credit exposure using external creditrating services and other analytical tools.

The Fund had group credit concentrations and maximum credit exposure, with respect to derivativeinstruments, in the following counterparty segments:

December 31, 2016 2015


European financial institutions 1 –

Due froma�liate 98 127

99 127


The Fund’s financial assets and liabilities measured at fair value on a recurring basis include derivativeinstruments. The fair value of derivative instruments reflects the Fund’s best estimates of market valuebased on generally accepted valuation techniques or models and supported by observable marketprices and rates. When such values are not available, the Fund uses discounted cash flow analysisfrom applicable yield curves based on observable market inputs to estimate fair value.


The Fund categorizes those financial assets and liabilities measured at fair value into oneof three di�erent levels depending on the observability of the inputs employed in the measurement.

Level 1

Level 1 includes financial instruments measured at fair value based on unadjusted quoted pricesfor identical assets and liabilities in active markets that are accessible at the measurement date.An active market for a financial instrument is considered to be a market where transactions occurwith su�cient frequency and volume to provide pricing information on an ongoing basis. The Funddid not have any financial instruments categorized as Level 1 as at December 31, 2016 or 2015.

Level 2

Level 2 includes financial instrument valuations determined using directly or indirectly observableinputs other than quoted prices included within Level 1. Financial instruments in this category are valuedusing models or other industry standard valuation techniques derived from observable market data.Such valuation techniques include inputs such as quoted forward prices, time value, volatility factorsand broker quotes that can be observed or corroborated in the market for the entire duration of thefinancial instrument. Financial instruments valued using Level 2 inputs include non-exchange tradedderivatives such as over-the-counter interest rate swaps for which observable inputs can be obtained.

Level 3

Level 3 includes financial instrument valuations based on inputs which are less observable, unavailableor where the observable data does not support a significant portion of the financial instruments’ fairvalue. Generally, Level 3 financial instruments are longer dated transactions, occur in less active markets,occur at locations where pricing information is not available or have no binding broker quote to supportLevel 2 classification. The Fund did not have any financial instruments categorized as Level 3 asat December 31, 2016 or 2015.


The Fund uses the most observable inputs available to estimate the fair value of its financial instruments.When possible, the Fund estimates the fair value of its financial instruments based on quoted marketprices. If quoted market prices are not available, the Fund uses estimates from third party brokers.For non-exchange traded derivatives classified in Levels 2 and 3, the Fund uses standard valuationtechniques to calculate the estimated fair value. These methods include discounted cash flows forforwards and swaps. Depending on the type of financial instrument and nature of the underlying risk,the Fund uses observable market prices (interest or foreign exchange) and volatility as primary inputsto these valuation techniques. Finally, the Fund considers its own credit default swap spread as wellas the credit default swap spreads associated with its counterparties in its estimation of fair value.

The Fund has categorized its derivative instruments, measured at fair value as follows:

December 31, 2016 Level 1 Level 2 Level 3


Instruments


Financial assets

Current derivative assets – 19 – 19

Long-termderivative assets – 80 – 80

Financial liabilities

Current derivative liabilities – (72) – (72)

Long-termderivative liabilities – (131) – (131)

Total net liability – (104) – (104)



Instruments


Financial assets

Current derivative assets – 22 – 22

Long-termderivative assets – 105 – 105


Current derivative liabilities – (42) – (42)

Long-termderivative liabilities – (150) – (150)

Total net liability – (65) – (65)

Changes in net fair value of financial instruments classified as Level 3 in the fair value hierarchy wereas follows:



Level 3 net derivative asset at beginning of year – 2

Settlements – (2)

Level 3 net derivative asset at endof year – –

The Fund’s policy is to recognize transfers as at the last day of the reporting period. There were no transfersbetween levels as at December 31, 2016 and 2015.

Fair Value of Other Financial Instruments

At December 31, 2016, the Fund’s long-term debt had a fair value of $2,415 million (2015 – $2,395 million).This fair value measurement has been classified as a Level 2 fair value measurement.


8. Other Long-Term InvestmentsAs a result of the deconsolidation of EIPLP, the Fund’s interest in other equity investments in AlliancePipeline, NRGreen Power Limited Partnership, and SunBridge Wind Power Facility, were removedfrom the Fund’s Statements of Financial Position at September 1, 2015, the closing date of the 2015Transaction. Income from these other equity investments for the year ended December 31, 2015 relateto the first eight months of the year.

Summarized combined financial information of the Fund’s interests in other investments accountedfor under the equity method was as follows:



Earnings

Revenues 301 445

Operating and administrative (90) (145)

Depreciation and amortization (72) (106)

Other income 5 2

Interest expense (36) (56)

Earnings 108 140

1 Reflects the deconsolidation of ECT and EIPLP (Note 2).

2 Retrospectively adjusted to furnish comparative information related to Alliance Pipeline US (Note 2).

9. DebtDecember 31, 2016 2015


Medium-termnotes

5.00%due June22, 2017 100 100

2.92%dueDecember 14, 2017 225 225

4.00%dueDecember 20, 2018 125 125

4.10%dueFebruary 22, 2019 300 300

4.85%dueNovember 12, 2020 100 100

4.85%dueFebruary 22, 2022 200 200

3.94%due January 13, 2023 275 275

3.95%dueNovember 19, 2024 500 500

4.87%dueNovember 21, 2044 250 250

Floating rate dueNovember 21, 2016 – 330

Credit facilities 225 –

Debt discount and financing costs (6) (8)

Total debt 2,294 2,397

Currentmaturities (325) (330)


Medium-Term Notes

The MTNs are unsecured and redeemable by the Fund prior to maturity, in whole or in part, from timeto time, and at the option of the Fund at a price equal to the greater of the applicable Governmentof Canada yield price and par. Interest on the MTNs is payable semi-annually. No MTNs were issuedduring the year ended December 31, 2016.

For the years ending December 31, 2017 through December 31, 2021, MTN maturities are $325 million,$125 million, $300 million, $100 million and nil, respectively, and $1,225 million thereafter. As atDecember 31, 2016, the MTNs had a fair value of $2,190 million (2015 – $2,395 million) based onquoted market prices.


Credit Facility

In October 2015, the Fund increased the size of its unsecured $500 million, 3-year standby committedcredit facility with a syndicate of commercial banks by $1,000 million, to a total of $1,500 million. On anannual basis, the Fund may request a one-year extension of the applicable maturity date. This was utilizedin August 2016 and the Fund extended the maturity date to August 3, 2019.

At December 31, 2016, there was $225 million (2015 – nil) drawn on the facility. Letters of credit totalled$11 million (2015 – $11 million) leaving $1,264 million (2015 – $1,489 million) of the credit facility availablefor use at December 31, 2016. The Fund’s credit facility carries a standby fee of 0.2% (2015 – 0.2%) perannum. The Fund is subject to several covenants under its credit facility, including covenants that limitoutstanding debt to a percentage of the Fund’s and EIPLP’s capitalization. The Fund was in compliancewith all covenants as at December 31, 2016.

Interest Expense



Interest expenseon long-termdebt 114 103 72

Interest on a�liate loans (Note 5) – 1 3

Amortization of financing costs andbank charges 5 4 3

119 108 78

Interest obligations on the Fund’s MTNs for the years ending December 31, 2017 through 2021are $84 million, $75 million, $63 million, $57 million and $52 million, respectively.

10. ECT Preferred Units20151 2014

Number ofUnits

MezzanineEquity

Number ofUnits

MezzanineEquity

(millions of Canadian dollars; number of units in millions)

ECTPreferredUnits, series 1

Balance, beginning of year 38 1,517 38 885

Redemption value adjustment – (287) – 632

Deconsolidation adjustment (38) (1,230) – –

Balance, endof year – – 38 1,517


Balance, beginning of year 16 641 16 374


Deconsolidation adjustment (16) (520) – –

Balance, endof year – – 16 641












Balance, beginning of year 15 607 – –

Issued – – 15 461




Total ECTPreferredUnits – – 87 3,499


ECT Preferred Units are entitled to non-cumulative distributions when declared by ECT, have no directvoting rights except in limited circumstances and all mature on June 30, 2050.


11. Trust Units2016 2015 2014

December 31,Numberof Units Amount

Numberof Units Amount

Numberof Units Amount


FundUnits, beginning of year 191 5,266 80 3,187 66 1,536

Issued 27 767 111 3,875 14 421

Share issue costs – (24) – (28) – (14)

Redemption value adjustment – 1,436 – (1,768) – 1,244

FundUnits, endof year1 218 7,445 191 5,266 80 3,187

1 Enbridge owned 94 million common trust units at December 31, 2016 (2015 – 94 million; 2014 – 10 million).

Holders of the class C units of EIPLP (EIPLP Class C Units), ECT Preferred Units and Fund Unitsmay exchange such securities in whole or in part for ECT Preferred Units, Fund Units or ENF commonshares, as applicable, at any time or from time to time, directly or indirectly on a one-for-one basispursuant to the terms of such securities and an exchange right support agreement entered into withENF (Exchange Right).

Pursuant to the Trust Indenture, an unlimited number of Fund Units may be issued by the Fund.Each Fund Unit represents an equal undivided beneficial interest in any distributions from the Fund andin the net assets in the event of termination or wind-up of the Fund. All Fund Units are voting and haveequal rights and privileges. The Fund is required to reserve a su�cient number of Fund Units to satisfythe Exchange Right.

Fund Units are redeemable at any time at the option of the holder. At December 31, 2016 and 2015,the redemption price per Fund Unit is equal to the net asset value per Fund Unit, calculated with referenceto the market price of an ENF common share, adjusted for non-consolidated assets and liabilities of ENF.The maximum amount payable by the Fund in respect of redemptions in any calendar month is limitedto $0.1 million. To the extent that a unitholder is not entitled to receive cash upon the redemption of FundUnits, the redemption price shall be satisfied, subject to all necessary regulatory approvals, by wayof a distribution of Fund property, which may include ECT notes or other assets held by the Fund.

12. Other IncomeYear endedDecember 31, 2016 20151 2014


Realized loss onderivative instruments – (9) 21

Unrealized loss onderivative instruments – (77) (25)

Unrealized gain on foreign intercompany loan – 99 16

Realized gain on foreign intercompany loan – 8 –

Gain ondisposition – 22 –

– 43 12



13. Changes in Operating Assets and LiabilitiesYear endedDecember 31, 2016 20151 20142


Accounts receivable andother, net (1) (7) (22)

Accounts receivable fromother a�liates 27 95 (25)

Other accounts payable – 17 1

Interest payable – 1 4

Due to a�liates – – 5

Deferred amounts andother assets – 18 27

Other long-term liabilities (1) (8) (16)

25 116 (26)

1 Reflects the deconsolidation of ECT and EIPLP (Note 2).2 Retrospectively adjusted to furnish comparative information related to the 2014 Transaction (Note 2).

14. Income TaxesIncome Tax Rate Reconciliation



Earnings before income taxes 648 192 213

Combined statutory income tax rate3 48% 15% 15%

Income taxes at federal statutory rate 311 29 32

Increase/(decrease) resulting from:

Provincial and state taxes – 29 16

Foreign andother statutory rate di�erentials – 15 19

Taxable component of trust distributions (216) (7) (8)

Deferred income taxes related to regulated operations4 – 11 5

Temporary di�erences not recognized (95) 1 (1)

Non-taxable portion of capital gains – (9) –

Other – 3 –

Income tax expense – 72 63

E�ective income tax rate – 37.5% 29.6%

1 Reflects the deconsolidation of ECT and EIPLP (Note 2).2 Retrospectively adjusted to furnish comparative information related to the 2014 Transaction (Note 2).3 As a result of the 2015 Transaction, the 2016 rate is the combined federal and provincial trust income tax rate. The 2015 and 2014 rates are the federal corporate income tax rate.4 The amounts in 2015 included the federal component of the tax e�ect of the write-o� of regulatory receivables.

Components of Pretax Earnings and Income Taxes



Earnings before income taxes

Canada 648 115 117

UnitedStates – 77 96

648 192 213

Current income taxes

Canada – 18 4

UnitedStates – – 23

– 18 27

Deferred income taxes

Canada – 23 21

UnitedStates – 31 15

– 54 36

Income taxes on earnings – 72 63


2 Retrospectively adjusted to furnish comparative information related to the 2014 Transaction (Note 2).


74 Overview

76 Performance Overview

80 Non-GAAP Measures

82 Objectives and Strategy

84 Industry Fundamentals

87 Growth Projects

90 Liquids Pipelines

97 Gas Pipelines

99 Green Power

101 Eliminations and Other


106 Quarterly Financial Information



114 Critical Accounting Estimates

115 Changes in Accounting Policies

117 EIPLP Ownership

Consolidated Financial Statements


119 Consolidated Statements of Earnings

120 Consolidated Statements of Comprehensive Income

121 Consolidated Statements of Partners’ Capital

122 Consolidated Statements of Cash Flows

123 Consolidated Statements of Financial Position

Notes to the ConsolidatedFinancial Statements



129 3. Changes in Accounting Policies

131 4. Segmented Information

132 5. Financial Statement E�ects of Rate Regulation

133 6. Acquisitions

134 7. Dispositions

135 8. Accounts Receivable and Other

135 9. Property, Plant and Equipment

135 10. Variable Interest Entities

136 11. Long-Term Investments

137 12. Restricted Long-Term Investments

137 13. Deferred Amounts and Other Assets

137 14. Intangible Assets

138 15. Accounts Payable and Other

138 16. Debt

139 17. Other Long-Term Liabilities

139 18. Asset Retirement Obligations

140 19. Partners’ Interests

142 20. Components of Accumulated Other Comprehensive Loss

143 21. Risk Management and Financial Instruments

150 22. Income Taxes

152 23. Other Income

152 24. Changes in Operating Assets and Liabilities


155 26. Commitments and Contingencies

155 27. Guarantees

156 Glossary

Enbridge Income Partners LPFinancial Report


Management’s Discussion & AnalysisThis Management’s Discussion and Analysis (MD&A) datedFebruary 17, 2017 should be read in conjunction with the auditedconsolidated financial statements and notes thereto of EnbridgeIncome Partners LP (EIPLP) for the year ended December 31, 2016,prepared in accordance with generally accepted accountingprinciples in the United States of America (U.S. GAAP). All financialmeasures presented in this MD&A are expressed in Canadian dollars,unless otherwise indicated. EIPLP supplements Enbridge IncomeFund’s (the Fund) financial statements and MD&A, and additionalinformation related to EIPLP is available under the Fund’s profileon SEDAR at www.sedar.com.

OverviewEIPLP was formed in 2002 and is involved in the generation,transportation and storage of energy through its interests in itsliquids pipelines business, including the Canadian Mainline and theRegional Oil Sands System, its 50% interest in the Alliance Pipeline,which transports natural gas from Canada to the United States,and its renewable and alternative power generation assets.

EIPLP is a member of the Fund Group, which also includesEnbridge Commercial Trust (ECT) and the Fund. EIPLP holdsall of the underlying operating entities of the Fund Group throughits subsidiaries and investees. Enbridge Inc. (Enbridge), throughits wholly-owned subsidiary, Enbridge Management Services Inc.(the Manager or EMSI), is responsible for the operations andday-to-day management of the Fund Group. The Manager alsoprovides administrative and general support services to the FundGroup. The limited partners of EIPLP are ECT and Enbridge andcertain of its subsidiaries.


On September 1, 2015, EIPLP acquired 100% interests in entitiesholding certain Canadian liquids pipelines, storage assets andrenewable energy assets (collectively, the Purchased Entities) fromEnbridge and certain of its subsidiaries for aggregate considerationof $30.4 billion plus incentive distribution and performance rightsand working capital adjustments (the 2015 Transaction).

As a result of the 2015 Transaction, EIPLP allocates earnings basedon the Hypothetical Liquidation at Book Value (HLBV) method.The HLBV method is applied for allocation of earnings and othercomprehensive income (OCI) where cash distributions, including bothpreference and residual distributions, are not based on the investor’sownership percentages. Under the HLBV method, a calculationis prepared at each balance sheet date to determine the amountthat partners would receive if EIPLP were to liquidate all of its assets,as valued in accordance with U.S. GAAP, and distribute that cashto the investors. The di�erence between the calculated liquidationdistribution amounts at the beginning and the end of the reportingperiod, after adjusting for capital contributions and distributions, arethe partners’ share of the earnings or loss from EIPLP for the period.

The 2015 Transaction was accounted for as a transaction amongentities under common control, similar to a pooling of interests,whereby the assets and liabilities acquired were recorded atEnbridge’s historic carrying values. Financial information for periodsprior to September 1, 2015 have been retrospectively adjustedto present the results of operations for EIPLP and its interestsin the Purchased Entities on a combined basis.

Enbridge Income Partners LP Management’s Discussion & Analysis 75


On November 7, 2014, EIPLP completed a transaction wherebyit acquired from Enbridge a 50% equity interest in the United Statesportion of the Alliance Pipeline (Alliance Pipeline US) and subscribedfor and purchased Class A units (Southern Lights Class A units)of certain Enbridge subsidiaries which provide a defined cashflow stream from the United States portion of Southern Lights(Southern Lights US) for aggregate consideration of $1.8 billion(the 2014 Transaction). At the time of the 2014 Transaction,EIPLP previously owned a 50% investment in the Canadianportion of the Alliance Pipeline (Alliance Pipeline Canada).

The Alliance Pipeline US component of the 2014 Transactionwas accounted for as a transaction among entities under commoncontrol, similar to the 2015 Transaction. Financial information forperiods prior to November 7, 2014 have been retrospectively adjustedto present the result of operations for EIPLP and its interestsin Alliance Pipeline US on a combined basis. The Southern LightsClass A Unit component of the 2014 Transaction was accounted foras a loan investment and did not require retrospective restatement.

As part of the 2015 Transaction, EIPLP indirectly acquired theClass B units of the Canadian portion of Southern Lights Pipeline(Southern Lights Canada). Together with the Class A unitsEIPLP acquired in the 2014 Transaction, EIPLP holds all theownership, economic interests and voting rights, direct and indirect,of Southern Lights Canada. For further details refer to LiquidsPipelines – Southern Lights Pipeline.

Operating Segments

EIPLP conducts its business through three business segments:Liquids Pipelines, Gas Pipelines and Green Power. These operatingsegments are strategic business units established by seniormanagement to facilitate the achievement of EIPLP’s long-termobjectives and the objectives of EIPLP’s partners, as well asto aid in resource allocation decisions and to assess operationalperformance. Financing costs, current and deferred income taxesand other costs not attributable to specific business segmentsare presented on a consolidated basis.

Liquids Pipelines

Liquids Pipelines consists of common carrier and contract crudeoil, natural gas liquids (NGL) and refined products pipelines, feederpipelines, gathering systems and terminals in Canada, includingCanadian Mainline, Regional Oil Sands System, Southern LightsPipeline, which includes Southern Lights Canada and SouthernLights Class A Units, Bakken System and Feeder Pipelines and Other.

Gas Pipelines

Gas Pipelines includes EIPLP’s 50% interest in the Alliance Pipelinesystem, which transports liquids-rich natural gas from northeastBritish Columbia, northwest Alberta and the Bakken areaof North Dakota to Channahon, Illinois.

Green Power

Green Power includes approximately 1,437 megawatts (MW) (1,052 MWnet after taking into account third party interests) of renewable andalternative energy generating capacity from wind farms, solar facilitiesand waste heat recovery facilities located primarily in the provincesof Alberta, Saskatchewan, Ontario and Quebec.

Eliminations and Other

In addition to the segments noted above, Eliminations and Otherincludes operating and administrative costs and foreign exchangecosts which are not allocated to business segments. Also includedin Eliminations and Other are new business development activities,general corporate investments and elimination of transactionsbetween segments required to present financial performanceand financial position on a consolidated basis.


Performance OverviewThree months ended

December 31,Year ended

December 31,

2016 2015 2016 2015 2014


Earnings attributable to partners1

LiquidsPipelines 1,137 286 2,770 (1) 575

GasPipelines 39 36 194 144 132

GreenPower 35 45 138 154 127

Eliminations andOther 4 20 (6) 151 108


Interest expense (105) (95) (392) (327) (316)

Income taxes recovery/(expense) (142) (20) (407) 59 5

Special interest rights distributions –TPDR2 (66) (44) (262) (58) –

Special interest rights distributions – IDR3 (12) – (47) – –

Earnings attributable to general and limited partners 890 228 1,988 122 631

Adjusted earnings4

LiquidsPipelines 383 384 1,512 640 81


GreenPower 34 39 133 112 93

Eliminations andOther 15 18 58 30 –

Adjusted earnings before interest and income taxes 472 478 1,887 933 248

Interest expense5 (95) (95) (371) (132) (12)

Income taxes5 (45) (41) (189) (95) (34)

Special interest rights distributions –TPDR2 (66) (44) (262) (58) –

Special interest rights distributions – IDR3 (12) – (47) – –

Adjusted earnings attributable to general and limited partners1 254 298 1,018 648 202

Cash flow data

Cashprovidedbyoperating activities 584 650 1,906 1,949 1,700

Cashprovidedby/(used in) investing activities 548 (699) (1,316) (5,305) (3,472)

Cashprovidedby/(used in) financing activities (992) 104 (426) 3,321 1,800

Available cash flow from operations6 543 509 2,051 986 367

Distributions7

Cashdistributions toECT8 217 169 850 546 349

Cashdistributions toEnbridge 250 209 999 279 –

TPDRandClassDunit distributions toEnbridge2 71 45 275 59 –

Total revenues1 787 747 3,922 1,874 2,186

Total assets1 27,262 25,634 23,283

Total long-term liabilities1 15,557 14,943 6,293

1 Earnings, cash flow data, total revenues, total assets and total long-term liabilities have been retrospectively adjusted to reflect the 2015 Transaction and the 2014 Transactionin information prior to the respective e�ective dates of the transactions as prescribed by U.S. GAAP for common control transactions.

2 Temporary Performance Distribution Right (TPDR) distributes Class D units and refers to the paid-in-kind component of the Special Interest Rights (SIR) distribution. Class D unitdistributions are also paid-in-kind with the issuance of additional Class D units.

3 Incentive Distribution Right (IDR) refers to the cash component of the SIR distribution (see Liquidity and Capital Resources – Distributions).4 Adjusted earnings before interest and income taxes (adjusted EBIT) and adjusted earnings are non-GAAP measures that do not have any standardized meaning prescribed

by generally accepted accounting principles. For more information on non-GAAP measures, refer to page 80.5 These balances are presented net of adjusting items.6 Available cash flow from operations (ACFFO) is defined as adjusted EBIT further adjusted for depreciation and amortization and distributions from investments in excess of/

(less than) equity earnings, less deductions for maintenance capital expenditures, interest expense, applicable taxes and other adjusting items. For further information on ACFFO,refer to Performance Overview – Available Cash Flow from Operations. ACFFO is a non-GAAP measure that does not have any standardized meaning prescribed by U.S. GAAP –see Non-GAAP Measures.

7 Refer to Liquidity and Capital Resources – Sources and Uses of Cash – Distributions for distribution rates.8 Amounts do not include the one-time Class A unit distribution of $264 million paid in December 2016 following the close of the disposition of the South Prairie Region assets.


Earnings Before Interest and Income Taxes

Earnings before interest and income taxes (EBIT) was $3,096 millionfor the year ended December 31, 2016 compared with $448 millionfor the year ended December 31, 2015 and $942 million for the yearended December 31, 2014.

The comparability of EIPLP’s results was impacted by a numberof unusual, non-recurring or non-operating factors that are listedin the Non-GAAP Reconciliation tables and discussed in the resultsfor each reporting segment. Changes in the unrealized derivativefair value gains and losses is a significant non-operating factor.EIPLP has a comprehensive long-term economic hedging programto mitigate interest rate, foreign exchange and commodity price risksthat create volatility in short-term earnings. Over the long term,EIPLP believes its hedging program supports reliable cash flows.

The majority of EIPLP’s unrealized derivative fair value gains andlosses are within its Liquids Pipelines segment, specifically withinthe Canadian Mainline, which was acquired as part of the 2015Transaction. Financial derivative instruments are used to hedgeexposure to fluctuations in foreign exchange rates, power costsand the price of allowance oil which are inherent in the CompetitiveToll Settlement (CTS) and drives Canadian Mainline revenue.For the year ended December 31, 2016, Canadian Mainline recognizednet unrealized derivative gains of $467 million, compared withnet unrealized derivative losses of $1,390 million and $499 millionin the corresponding 2015 and 2014 periods, respectively.

In addition, EBIT for 2016 reflected an $850 million gain withinthe Liquids Pipelines segment related to the disposition of theSouth Prairie Region assets in December 2016.

Excluding the impact of unusual, non-recurring or non-operatingfactors, EIPLP EBIT increased in 2016 primarily as a result of strongercontributions from the Liquids Pipelines and Gas Pipelines segments.

The Canadian Mainline contribution increased primarily due to strongoil sands production growth in western Canada enabled by pipelinecapacity expansion projects placed into service in 2015. EBIT growthwas partially o�set by the impact of extreme wildfires in northeasternAlberta and the combination of a lower average International JointTari� (IJT) Residual Benchmark Toll, which decreased e�ectiveApril 1, 2016, and a lower foreign exchange rate on hedges usedto convert Canadian Mainline United States dollar toll revenuesto Canadian dollars. For more information on the wildfires, referto Liquids Pipelines – Impact of Wildfires in Northeastern Alberta.

Similarly, the increase in EIPLP EBIT in 2015 was driven by strongeroperating performance from the Canadian Mainline due to higherthroughput, partly attributed to the expansion of the CanadianMainline completed in July 2015. Other factors contributing toan increase in EBIT in 2015 were higher terminalling revenuesand a favourable United States/Canada foreign exchange rate.Partially o�setting these positive factors was a lower average IJT,higher power costs associated with higher throughput andincreased depreciation expense due to an increased asset base.Partially mitigating the impact of a lower average IJT were newsurcharges related to system expansions in 2015.

Within Gas Pipelines, EBIT from Alliance Pipeline for the year endedDecember 31, 2016 was higher compared with the corresponding2015 and 2014 periods primarily due to improved operationale�ciencies and stronger asset performance resulting from strongdemand for seasonal firm service under Alliance Pipeline’s newservices framework that commenced in the fourth quarter of 2015.The increase in 2015 EBIT when compared with 2014 was primarilydue to incremental contributions from Alliance Pipeline US asa result of the 2014 Transaction, partially o�set by a shutdownof Alliance Pipeline Canada in August 2015.

The Green Power segment EBIT decreased in 2016 as a resultof disruptions at certain eastern Canadian wind farms in the firstquarter and fourth quarter of 2016 due to weather conditionsthat caused icing of blades as well as weaker wind resourcesexperienced at certain facilities in Canada during the first halfand fourth quarter of 2016. The significant increase in 2015 EBITwhen compared with 2014 was due to incremental earningsfrom the purchase of additional interests in the Lac Alfred andMassif du Sud wind projects in the fourth quarter of 2014.

Factors unique to the fourth quarter include the gain relatedto the disposition of the South Prairie Region assets. Excludingthe impact of the gain on disposition and other non-recurringor non-operating factors, performance drivers were largelyconsistent with the year-to-date trend of strong throughputin Liquids Pipelines and Gas Pipelines, including a record monthof throughput on the Canadian Mainline in December 2016.

Earnings Attributable to General and Limited Partners

Earnings attributable to general and limited partners of EIPLP were$1,988 million for the year ended December 31, 2016 compared with$122 million for the year ended December 31, 2015 and $631 millionfor the year ended December 31, 2014.

In addition to the factors discussed in Performance Overview –Earnings Before Interest and Income Taxes above, the change inearnings attributable to general and limited partners in 2016 was alsoimpacted by TPDR and IDR distributions on SIR issued as part of the2015 Transaction, higher interest expense resulting from incrementaldebt incurred to fund asset growth and lower capitalized interestperiod-over-period as a result of projects coming into service.Additionally, income taxes increased in 2016 largely due to theincrease in earnings before tax compared to 2015 and deferred taxesof $119 million related to the sale of the South Prairie Region assets.

Similarly, earnings attributable to general and limited partnersin 2015 were impacted by the TPDR distributions on SIR issuedas part of the 2015 Transaction, higher income taxes recoverydue to taxable losses and higher interest expense resulting fromhigher levels of debt in the third and fourth quarters of 2015.

Fourth quarter performance drivers for earnings attributableto general and limited partners were consistent with the factorsimpacting EBIT discussed above.


Adjusted EBIT

Adjusted EBIT was $1,887 million for the year ended December 31, 2016compared with $933 million and $248 million for the comparative2015 and 2014 periods, respectively. The increase in adjusted EBITis attributable to the substantial increase of EIPLP’s asset basefollowing the 2015 Transaction. The most notable assets contributingincremental adjusted EBIT were the Canadian Mainline, dueto expansion, as well as the reversal and expansion of Line 9Bin the fourth quarter of 2015 and the Regional Oil Sands System,which benefitted from assets placed into service late in 2015.Also bolstering adjusted EBIT were higher contributions fromthe Gas Pipelines segment as discussed above.

Fourth quarter adjusted EBIT decreased slightly in 2016 comparedwith the same period of 2015, reflecting increased volumes and theimpact of the reversal and expansion of Line 9B, more than o�setby a decrease in the Canadian Mainline IJT Residual Benchmark Tolland a lower rate on foreign exchange hedges of United States dollartoll revenue over the prior year, as discussed above. The IJT ResidualBenchmark Toll is reset on an annual basis, e�ective April 1 of each year.

Adjusted Earnings Attributable to Generaland Limited Partners

Adjusted earnings attributable to general and limited partners, referredto as adjusted earnings, were $1,018 million for the year endedDecember 31, 2016 compared with $648 million and $202 million forthe comparative 2015 and 2014 periods, respectively. The increasesreflected in the Performance Overview – Adjusted EBIT discussionabove were partially o�set by higher interest expense due to higherlevels of debt and higher income taxes expense due to increasedbusiness activity, as well as TPDR and IDR distributions on the SIR.

Fourth quarter performance drivers for adjusted earnings wereconsistent with the factors impacting adjusted EBIT discussed above.

Available Cash Flow from Operations

ACFFO represents cash available to fund distributions on Class Aand Class C units, as well as for debt repayments and reserves.Such reserves are determined by the Manager and are usedfor payment of committed charges, such as interest and incometaxes, and for execution of the capital maintenance program.

For the year ended December 31, 2016, EIPLP’s ACFFO was$2,051 million compared with $986 million and $367 million forthe comparative 2015 and 2014 periods, respectively. Similar toadjusted EBIT, the year-over-year increase in ACFFO was drivenby the significant increase of EIPLP’s asset base following the2015 Transaction as well as stronger contributions from EIPLP’sinvestment in Alliance Pipeline and lower current income taxesdue to the optimization of tax deductions within the Fund Group.These increases were partially o�set by higher maintenance capitalexpenditures and higher interest expense, both resulting fromincreased business activity associated with the increased assetbase. ACFFO was also negatively impacted by approximately$36 million as a result of the northeastern Alberta wildfires in thesecond quarter of 2016. The fourth quarter of 2016 reflected similaroperational trends as noted in the discussion on adjusted EBIT.

Cash Flows

Cash provided by operating activities was $1,906 million forthe year ended December 31, 2016 compared with $1,949 millionand $1,700 million for the years ended December 31, 2015 and 2014,respectively. Cash provided by operating activities for 2016 and2015 reflected stronger contributions from EIPLP’s operatingassets, most notably the Canadian Mainline and Alliance Pipeline,as well as incremental cash flow generated from assets placed intoservice in recent years, as further discussed in Liquidity and CapitalResources. These positive e�ects were o�set by higher interestand income taxes.

To finance the 2015 Transaction, in addition to issuing equityto Enbridge as a portion of the consideration, Class A units wereissued to ECT for $3,000 million to fund the cash componentsof the purchase price. Additional Class A units were issued to ECTin November 2015 subsequent to Enbridge Income Fund Holdings Inc.’s(ENF) public issuance to facilitate the funding of the secured capitalgrowth program.

As part of the 2014 Transaction, EIPLP acquired a 50% interestin Alliance Pipeline US and subscribed for and purchased SouthernLights Class A Units which provide a defined cash flow streamfrom the Southern Lights Pipeline. To finance these investments,EIPLP issued Class A units to ECT for $1,760 million.

In addition to the above transactions, EIPLP’s cash flows fluctuatewith normal business activities. The financing and investingactivities cash flows are impacted by the financing and executionof the secured capital growth program prior to projects goinginto service and providing cash inflows from operating activities.

Impact of Low Commodity Prices

The majority of EIPLP’s earnings and cash flows are generatedfrom tolls and fees charged for the energy delivery services thatit provides to its customers. Business arrangements are structuredto minimize exposure to commodity price movements and any residualexposure is closely monitored and managed through disciplinedhedging programs. Commercial structures are typically designed toprovide a measure of protection against the risk of a scenario wherefalling commodity prices indirectly impact the utilization of EIPLP’sfacilities. Protection against volume risk is generally achieved throughregulated cost of service tolling arrangements, long-term take-or-paycontract structures and fee for service arrangements with specificfeatures to mitigate exposure to falling throughput.

Benchmark prices for West Texas Intermediate (WTI) crude fellbelow US$30 per barrel at the beginning of 2016 and have remainedvolatile as the market seeks to re-balance supply and demand.Prices began to recover throughout the year and have climbed aboveUS$50 per barrel periodically. WTI crude prices averaged US$43per barrel for 2016 but ended the year above US$53 per barrel. WTIcrude prices averaged US$52.50 per barrel in January 2017. AlthoughEIPLP is exposed to throughput risk under the CTS on the CanadianMainline and under certain tolling agreements applicable to otherliquids pipelines assets, including Southern Lights Canada, thereduction of investment in exploration and development programs


by EIPLP’s shippers is not expected to materially impact the financialperformance of EIPLP. It is expected that existing conventionaland oil sands production should be more than su�cient to supportcontinued high utilization of EIPLP’s Canadian Mainline, and in fact,mainline throughput as measured at the Canada/United Statesborder at Gretna, Manitoba saw record throughput of 2.6 millionbarrels per day (bpd) in the month of December 2016. Also in 2016,the Canadian Mainline has continued to be subject to apportionmentof heavy crudes, as nominated volumes currently exceed capacity onportions of the system. Due to the nature of the commercial structuresdescribed above, EIPLP’s earnings and cash flows are not expectedto be materially a�ected by the current low price environment.

The lower oil prices are also causing some sponsors of oil sandsdevelopment programs to reconsider the timing of previouslyannounced upstream development projects. Cancellation or deferralof these projects would a�ect longer-term supply growth fromthe Western Canadian Sedimentary Basin (WCSB). EIPLP’sexisting growth capital program, which includes the Canadianportion of the Line 3 Replacement Program (Canadian L3R Program),has been commercially secured and is expected to generatereliable and predictable earnings growth through 2019 and beyond.Importantly, after taking into account the potential for some of theseprojects to be cancelled or deferred in an environment where lowprices persist, EIPLP’s most recent near-term supply forecastrea�rms that the expansions and extensions of its liquids pipelinesystem that were completed in 2015, as well as the projects currentlyin progress will provide cost-e�ective transportation services to keymarkets in North America and will be well utilized.

In the current low-price environment, EIPLP is working closely withproducers to find ways to optimize capacity and provide enhancedaccess to markets in order to alleviate locational pricing discounts.Examples include the expansion of EIPLP’s Canadian Mainlinecompleted in July 2015 and the reversal and expansion of Line 9Bwhich was completed in December 2015.

Distributions

Distributions to partners are declared monthly and paid in thefollowing month. Cash distributions to ECT based on Class A unitownership were declared at an annual aggregate rate of $2.2586 perunit, representing $850 million for the year ended December 31, 2016compared with $1.9669 per unit or $546 million for the year endedDecember 31, 2015 and $1.7621 per unit or $349 million for the yearended December 31, 2014. In addition, EIPLP also paid a one-timeClass A unit distribution to ECT of $0.6933 per unit or $264 millionfollowing the close of the disposition of the South Prairie Region assetsin December 2016. Cash distributions to Enbridge based on Class Cunit ownership were declared at an annual aggregate rate of $2.1504per unit or $952 million for the year ended December 31, 2016compared with $0.6297 per unit or $279 million for the year endedDecember 31, 2015. Cash distributions based on the IDR componentof the SIR were $47 million for the year ended December 31, 2016compared with nil for the year ended December 31, 2015. Paid-in-kinddistributions to Enbridge on Class D unit ownership were $13 million

and the TPDR component of the SIR were $262 million for the yearended December 31, 2016 compared with $1 million on the Class Dunit ownership and $58 million on the TPDR component of the SIRfor the year ended December 31, 2015. Refer to Liquidity and CapitalResources – Sources and Uses of Cash – Distributions for moredetails on the distributions.

The increase in distributions declared in 2016 compared with2015 is due to the units issued during the year as well as higherdistribution rates for the Class A units, Class C units and Class Dunits in 2016 compared with 2015. Similarly, the increase indistributions declared in 2015 compared with 2014 is due to unitsissued in 2015, with a portion of the Class A units issued in 2015,as well as the Class C units and SIR issued in conjunction withthe 2015 Transaction. Additionally, the Class A units’ distributionrates for 2015 were higher than in 2014.

Revenues

EIPLP generates revenues from three primary sources: transportationand other services, electricity sales and revenues from a�liates.Transportation and other services revenue of $3,602 million forthe year ended December 31, 2016 (2015 – $1,501 million; 2014 –$1,877 million) were earned from EIPLP’s crude oil transportationbusinesses. For EIPLP’s transportation assets operating undermarket-based arrangements, revenues are driven by volumestransported and the corresponding tolls for transportation services.For assets operating under take-or-pay contracts, revenues reflectthe terms of the underlying contract for services or capacity.For rate-regulated assets, revenues are charged in accordance withtolls established by the regulator, and in most cost-of-service basedarrangements are reflective of EIPLP’s cost to provide the serviceplus a regulator-approved rate of return. Increased throughputon EIPLP’s core liquids pipeline assets combined with incrementalrevenues associated with assets placed into service in recentyears resulted in revenue increases; however, for 2015 and 2014,the increases were more than o�set by unrealized derivative fairvalue losses on foreign exchange contracts.

Electricity sales of $268 million for the year ended December 31, 2016(2015 – $295 million; 2014 – $258 million) include power productionrevenues from EIPLP’s portfolio of renewable and power generationassets. The decrease in electricity sales in 2016 compared with 2015reflected weather conditions during the first half and fourth quarterof 2016 that negatively impacted power production at certain windfacilities in Canada. Higher revenues in 2015 compared with 2014reflected incremental revenues from the purchase of additionalinterests in the Lac Alfred and Massif du Sud wind projects inthe fourth quarter of 2014.

EIPLP’s revenues also included changes in unrealized derivative fairvalue gains and losses related to foreign exchange and commodityprice contracts used to manage exposures from movements in foreignexchange rates and commodity prices. The unrealized mark-to-market accounting creates volatility and impacts the comparabilityof revenues in the short-term, but EIPLP believes over the long-term,the economic hedging program supports reliable cash flows.



Forward-looking information, or forward-looking statements, havebeen included in this MD&A to provide information about EIPLPand EIPLP’s subsidiaries and a�liates, including management’sassessment of EIPLP’s plans and operations. This information maynot be appropriate for other purposes. Forward-looking statements aretypically identified by words such as “anticipate”, “expect”, “project”,“estimate”, “forecast”, “plan”, “intend”, “target”, “believe”, “likely”and similar words suggesting outcomes or statements regardingan outlook. Forward-looking information or statements included orincorporated by reference in this document include, but are not limitedto, statements with respect to the following: EBIT or adjusted EBIT;earnings/(loss) or adjusted earnings/(loss); ACFFO; cash flows;distributions and policy; costs related to announced projects andprojects under construction; in-service dates for announced projectsand projects under construction; capital expenditures; actionsof regulators; costs related to leak remediation and potentialinsurance recoveries; expectations regarding commodity prices;supply forecasts; and expectations on impact of hedging program.

Although EIPLP believes these forward-looking statements arereasonable based on the information available on the date suchstatements are made and processes used to prepare the information,such statements are not guarantees of future performance andreaders are cautioned against placing undue reliance on forward-looking statements. By their nature, these statements involvea variety of assumptions, known and unknown risks and uncertaintiesand other factors, which may cause actual results, levels of activityand achievements to di�er materially from those expressed or impliedby such statements. Material assumptions include assumptions aboutthe following: the expected supply of and demand for crude oil, naturalgas, NGL and renewable energy; prices of crude oil, natural gas, NGLand renewable energy; exchange rates; inflation; Canadian pipelineexport capacity; levels of competition; interest rates; availabilityand price of labour and construction materials; operational reliability;customer and regulatory approvals; maintenance of support andregulatory approvals for EIPLP’s projects; anticipated in-service dates;weather; credit ratings; capital project funding; EBIT or adjusted EBIT;earnings/(loss) or adjusted earnings/(loss); ACFFO; and distributions.Assumptions regarding the expected supply of and demand forcrude oil, natural gas, NGL and renewable energy, and the pricesof these commodities, are material to and underlie all forward-lookingstatements. These factors are relevant to all forward-lookingstatements as they may impact current and future levels of demandfor EIPLP’s services. Similarly, exchange rates, inflation and interestrates impact the economies and business environments in whichEIPLP operates and may impact levels of demand for EIPLP’sservices and cost of inputs, and are therefore inherent in all forward-looking statements. Due to the interdependencies and correlationof these macroeconomic factors, the impact of any one assumptionon a forward-looking statement cannot be determined with certainty,particularly with respect to EBIT, adjusted EBIT, earnings/(loss),adjusted earnings/(loss), ACFFO or distributions. The mostrelevant assumptions associated with forward-looking statementson announced projects and projects under construction, includingestimated completion dates and expected capital expenditures,include the following: the availability and price of labour andconstruction materials; the e�ects of inflation and foreign exchange

rates on labour and material costs; the e�ects of interest rateson borrowing costs; and the impact of weather and customer,government and regulatory approvals on construction and in-serviceschedules and cost recovery regimes.

EIPLP’s forward-looking statements are subject to risks anduncertainties pertaining to distribution policy, operating performance,regulatory parameters, project approval and support, renewalsof rights of way, weather, economic and competitive conditions, publicopinion, changes in tax laws and tax rates, exchange rates, interestrates, commodity prices, political decisions, supply of and demand forcommodities, including but not limited to those risks and uncertaintiesdiscussed in this MD&A. The impact of any one risk, uncertaintyor factor on a particular forward-looking statement is not determinablewith certainty as these are interdependent and EIPLP’s future courseof action depends on management’s assessment of all informationavailable at the relevant time. Except to the extent required by applicablelaw, EIPLP assumes no obligation to publicly update or reviseany forward-looking statements made in this MD&A or otherwise,whether as a result of new information, future events or otherwise.All subsequent forward-looking statements, whether written ororal, attributable to EIPLP or persons acting on EIPLP’s behalf, areexpressly qualified in their entirety by these cautionary statements.

Non-GAAP MeasuresThis MD&A contains references to adjusted EBIT, adjusted earningsand ACFFO. Adjusted EBIT represents EBIT adjusted for unusual,non-recurring or non-operating factors on both a consolidated andsegmented basis. Adjusted earnings represents earnings adjustedfor unusual, non-recurring or non-operating factors includedin adjusted EBIT, as well as adjustments for unusual, non-recurringor non-operating factors in respect of interest expense and incometaxes on a consolidated basis. These factors, referred to as adjustingitems, are reconciled and discussed in the financial results sectionsfor the a�ected business segments.

ACFFO represents cash available to fund distributions on Class Aand Class C units, as well as for debt repayments and reserves.ACFFO consists of adjusted EBIT further adjusted for non-cashitems, representing cash flow from EIPLP’s underlying businesses,less deductions for maintenance capital expenditures, interestexpense, applicable taxes and further adjusted for unusual,non-recurring or non-operating factors not indicative of theunderlying or sustainable cash flows of the business. ACFFOis important to unitholders as the Fund Group’s objective isto provide a predictable flow of distributions to unitholders.

The Manager believes the presentation of adjusted EBIT, adjustedearnings and ACFFO give useful information to partners andunitholders as they provide increased transparency and insight intothe performance of EIPLP. The Manager uses adjusted EBIT, adjustedearnings and ACFFO to set targets and to assess the performanceof EIPLP. Adjusted EBIT, adjusted earnings and ACFFO are notmeasures that have standardized meaning prescribed by U.S. GAAPand are not U.S. GAAP measures. Therefore, these measures maynot be comparable with similar measures presented by other issuers.

The tables opposite summarize the reconciliation of the GAAP andnon-GAAP measures.


Non-GAAP Reconciliations

EBIT to Adjusted EBIT



2016 2015 2016 2015 2014



Retrospective adjustments1:

2015Transaction – LiquidsPipelines – – – 324 (491)

2015Transaction –GreenPower – – – (36) (37)

2015Transaction –Eliminations andOther – – – (9) (92)

2014Transaction –GasPipelines – – – – (64)

Adjusting items2:

Changes in unrealized derivative fair value (gains)/loss3 87 116 (502) 371 25

Unrealized (gains)/loss on translation ofUnitedStates dollarintercompany loan receivable (10) (20) 43 (130) (16)

Make-up rights adjustments 1 – 31 – –

NortheasternAlbertawildfires pipeline and facilities restart costs 8 – 47 – –

Gain on sale of SouthPrairie Region assets (850) – (850) – –

Gain on sale of non-core assets – – – (22) –

Leak insurance recoveries – (22) (5) (22) –

Employee severance cost allocation 21 18 21 18 –

Derecognition of regulatory balances – – 6 (8) –

Realized gain on subscription price – – – – (22)

Other – (1) – (1) 3


1 The impact of the retrospective adjustments related to the 2015 Transaction and the 2014 Transaction has been removed from adjusted EBIT to reflect earnings generatedunder EIPLP’s ownership e�ective September 1, 2015 and November 7, 2014, respectively. Retrospective adjustments also include the impacts of significant, unusual, non-recurringor non-operating factors included in the retrospectively adjusted amounts for U.S. GAAP purposes.

2 The above table summarizes adjusting items by nature. For a detailed listing of adjusting items by segment, refer to individual segment discussions.3 Changes in unrealized derivative fair value gains and losses are presented net of amounts realized on the settlement of derivative contracts during the applicable period.

Adjusted EBIT to Adjusted Earnings



2016 2015 2016 2015 2014


LiquidsPipelines 383 384 1,512 640 81


GreenPower 34 39 133 112 93

Eliminations andOther 15 18 58 30 –



Income taxes1 (45) (41) (189) (95) (34)

Special interest rights distributions –TPDR (66) (44) (262) (58) –

Special interest rights distributions – IDR (12) – (47) – –

Adjusted earnings attributable to general and limited partners 254 298 1,018 648 202

1 These balances are presented net of adjusting items.


Available Cash Flow from Operations



2016 2015 2016 2015 2014



Depreciation and amortization expense 152 155 627 299 135

Distributions fromSouthern LightsClassAUnits1 5 4 18 20 2

Cashdistributions in excess of/(less than) equity earnings 23 3 15 (12) 11

Maintenance capital expenditures2 (38) (6) (109) (40) (13)


Current income taxes3 (2) (41) (34) (97) (4)

Special interest rights distributions – IDR (12) – (47) – –

Other adjusting items 23 7 37 7 –

Available cash flow fromoperations (ACFFO) 543 509 2,051 986 367

1 Prior to the close of the 2015 Transaction, EIPLP received distributions from both Enbridge subsidiaries that indirectly owned the Southern Lights Class A Units. Subsequent tothe close of the 2015 Transaction, EIPLP received distributions from the Enbridge subsidiary that indirectly owns Southern Lights US only.

2 Maintenance capital expenditures are expenditures that are required for the ongoing support and maintenance of the existing pipeline system or that are necessary to maintain theservice capability of the existing assets (including the replacement of components that are worn, obsolete or completing their useful lives). For the purpose of ACFFO, maintenancecapital excludes expenditures that extend asset useful lives, increase capacities from existing levels or reduce costs to enhance revenues or provide enhancements to the servicecapability of the existing assets. Maintenance capital expenditures occur primarily within EIPLP’s Liquids Pipelines segment.

3 These balances are presented net of adjusting items.

Objectives and StrategyEIPLP’s objective is to provide a predictable flow of distributable cash and to increase, where prudent,cash distributions to its partners, being ECT and Enbridge. EIPLP’s objectives and strategies are alsoaligned to support the corporate vision and strategies of ENF and the Fund, as well as of EIPLP’ssponsor, Enbridge.

In order to achieve these objectives, the Manager relies on the following strategic priorities:





Commitment to Safety and Operational Reliability

The commitment to safety and operational reliability means achieving and maintaining industry leadershipin safety (process, public and personal) and ensuring the reliability and integrity of the systems Enbridgeand its subsidiaries operate in order to generate, transport and deliver the energy society counts on andto protect the environment.

Under the umbrella of Enbridge’s Operational Risk Management Plan (ORM Plan) introduced in 2010,Enbridge has undertaken extensive maintenance, integrity and inspection programs across its pipelinesystems. The ORM Plan has resulted in strong improvements in the area of safety and operational riskmanagement, a bolstering of incident response capabilities, employee and public safety protocols andimproved communications with landowners and first responders. In addition, an enterprise-wide safetyand risk management framework has been implemented to ensure Enbridge identifies, prioritizes ande�ectively prevents and mitigates risks across the enterprise. Enbridge strives to embed a common riskmanagement framework within its operations and those of its joint venture partners. Supporting theseinitiatives is a safety culture that strives towards a target of 100% safe operations, with a beliefthat all incidents can be prevented. To achieve the goal of industry leadership, Enbridge measuresits performance as compared to standard industry performance, transparently reports its resultsand continues to use external assessments to measure its performance.


Strengthen Core Businesses

The 2015 Transaction was transformational for EIPLP. It provideda greater asset base and continued to generate value for EIPLP’spartners throughout the year.

Within EIPLP’s Liquids Pipelines business, strategies to strengthenthe core business are focused on optimizing asset performance,strengthening stakeholder and customer relationships and providingaccess to new markets for production from western Canada, all whileensuring safe and reliable operations. EIPLP’s asset optimizatione�orts focus on maximizing the operational and financial performanceof its infrastructure assets within established risk parameters, providingcompetitive services and value to customers. EIPLP’s assets arestrategically located and well-positioned to capitalize on opportunities.In 2016, despite unfavourable commodity market conditions,the Canadian Mainline delivered record volumes of crude intomarkets in the United States. EIPLP’s existing asset footprint, accessto major North American markets and the ability to incrementallyenhance its capacity through low-cost expansions provide EIPLP’scustomers with an attractive and reliable path to market.

The Liquids Pipelines business acquired by EIPLP is expectedto have future organic growth opportunities beyond the currentinventory of secured projects, which are discussed in Growth Projects.EIPLP will have a first right to execute any such projects that fallwithin the footprint of the Canadian Liquids Pipelines business.

In Gas Pipelines, EIPLP seeks to optimize the competitive advantageof its existing asset footprint, as the Alliance Pipeline is well-positionedto provide liquids-rich gas transportation services to developingregions in northeastern British Columbia, northwestern Albertaand the Bakken. Alliance Pipeline successfully re-contracted itsfirm capacity with shippers under its new services framework thatcame into e�ect in December 2015. Long-term contracts have beensecured through staged and non-staged receipt or full path serviceswith an average contract length of approximately five years. In 2016,Alliance Pipeline has benefitted from strong demand for seasonalfirm services through its open season process. For further detailsrefer to Gas Pipelines – Alliance Pipeline System.

In Green Power, strategies are driven by the objective to manageand maintain facilities in such a way as to maximize power generationand related revenues when the relevant wind, solar or waste heatenergy resource is available.

The Manager will continue to assess ways to generate value forEIPLP’s partners, including reviewing opportunities that may leadto acquisitions or other strategic transactions, some of which maybe material and involve EIPLP’s sponsor, Enbridge. Opportunitiesare screened, analysed and assessed using strict operating, strategicand financial criteria with the objective of ensuring the e�ectivedeployment of capital and the enduring financial strength andstability of EIPLP.

Focus on Project Management

Enbridge’s enterprise-wide objective is to safely deliver projectson time and on budget and at the lowest practical cost whilemaintaining the highest standards for safety, quality, customersatisfaction and environmental and regulatory compliance.With the large slate of commercially secured growth projectsbeing undertaken by EIPLP, successful project execution is criticalto the success of EIPLP’s strategy.

Growth projects across the Enbridge entities, including those beingundertaken by EIPLP, are managed centrally by Enbridge’s MajorProjects Group, which continues to build upon and enhance the keyelements of its rigorous project management processes including:employee and contractor safety; long-term supply chain agreements;quality design, materials and construction; extensive regulatoryand public consultation; robust cost, schedule and risk controls;and e�cient project transition to operating units. Ongoing workto ensure project execution costs remain competitive in any marketenvironment is a priority.

Preserve Financing Strength and Flexibility

Adequate financing strength and flexibility is crucial to the growthstrategy of EIPLP. Ongoing access to cost e�ective sources of debtand equity capital is critical to the successful execution of EIPLP’sstrategy to expand existing assets and acquire or develop newenergy infrastructure.

With support from Enbridge and the Fund Group, EIPLP’sfinancial strategies are designed to ensure it has su�cient financialflexibility to meet its capital requirements. To support this objective,Enbridge and the Fund Group develop financing plans and strategiesto manage credit ratings, diversify funding sources and maintainsubstantial standby bank credit capacity and access to capitalmarkets. For further discussion on EIPLP’s financing strategies,refer to Liquidity and Capital Resources.

As part of Enbridge’s enterprise-wide risk management policy, EIPLPengages in a comprehensive long-term economic hedging programto mitigate the impact of fluctuations in interest rates, foreignexchange and commodity price on EIPLP’s earnings. For furtherdetails, refer to Risk Management and Financial Instruments.

To the extent that ENF does not fund any portions of the growthcapital, Enbridge will be required until December 31, 2020 to provideEIPLP with equity financing for such projects, unless the project isrelated to the Line 3 Replacement Program in which case Enbridge’sobligation will be to fund the equity requirements for such projectuntil it is placed into service.


Industry FundamentalsSupply and Demand for Liquids

Enbridge has an established and successful history of being the

largest transporter of crude oil to the United States, the world’s

largest market. While United States’ demand for Canadian crude

oil production will support the use of Enbridge infrastructure for

the foreseeable future, North American and global crude oil supply

and demand fundamentals are shifting, and Enbridge has a role

to play in this transition by developing long-term transportation

options that enable the e�cient flow of crude oil from supply

regions to end-user markets.

In the third quarter of 2014, the price of crude oil began a dramatic

decline. The downturn in crude oil prices has impacted EIPLP’s

liquids pipelines’ customers, who responded by reducing their

exploration and development spending for 2016 and into 2017.

The international market for crude oil has seen a significant increase

in production from North American basins and increased production

from the Organization of Petroleum Exporting Countries (OPEC)

in the face of slower global demand growth. Benchmark prices for

WTI crude fell below US$30 per barrel at the beginning of 2016

and have remained volatile as the market seeks to re-balance

supply and demand. Prices began to recover throughout the year,

in response to anticipated cuts in OPEC country production among

other factors, and have climbed above US$50 per barrel periodically.

WTI crude prices averaged US$43 per barrel for 2016 but ended

the year above US$53 per barrel. WTI crude prices averaged

US$52.50 per barrel in January 2017.

Notwithstanding the low price environment, the mainline system

has thus far continued to be highly utilized and in fact, mainline

throughput as measured at the Canada/United States border

at Gretna, Manitoba saw record throughput of 2.6 million bpd

in the month of December 2016. The mainline system continues to

be subject to apportionment of heavy crudes, as nominated volumes

currently exceed capacity on portions of the system. The impact

of low crude oil prices on the financial performance of EIPLP’s liquids

pipelines business is expected to be relatively modest given the

commercial arrangements which underpin many of the pipelines

that make up the liquids system and provide a significant measure

of protection against volume fluctuations. In addition, EIPLP’s

mainline system is well positioned to continue to provide safe

and e�cient transportation which will enable western Canadian

and Bakken production to reach attractive markets in the United

States and eastern Canada at a competitive cost relative to other

alternatives. The fundamentals of oil sands production and low

crude oil prices have caused some sponsors to reconsider the timing

of their upstream oil sands development projects. However, recently

updated forecasts continue to reflect long-term supply growth from

the WCSB, although the projected pace of growth is slower than

previous forecasts as companies continue to assess the viability

of certain capital investments in the current low price environment.

Over the long term, global energy consumption is expectedto continue to grow, with the growth in crude oil demand primarilydriven by emerging economies in regions outside the Organizationfor Economic Cooperation and Development (OECD), mainly Indiaand China. While OECD countries, including Canada, the UnitedStates and western European nations, will experience populationgrowth, the emphasis placed on energy e�ciency, conservationand a shift to lower carbon fuels, such as natural gas and renewables,will reduce crude oil demand over the long term. Accordingly, thereis a strategic opportunity for North American producers to growproduction to displace foreign imports and participate in the growingglobal demand outside North America.

In terms of supply, long-term global crude oil production is expectedto continue to grow through 2035, with growth in supply primarilycontributed by North America, Brazil and OPEC. Growth in NorthAmerica is largely driven by production from the oil sands andthe continued development of tight oil plays including the Permian,Bakken and Eagle Ford formations. Growth in supply from OPEC isprimarily a result of a shift in OPEC’s strategy from ‘balancing supply’to ‘competing for market share’ in Asia and Europe. However, politicaluncertainty in certain oil producing countries, including Libya and Iraq,increases risk in those regions’ supply growth forecasts and makesNorth America one of the most secure supply sources of crude oil.As witnessed throughout 2016 and early 2017, North Americansupply growth can be influenced by macro-economic factors thatdrive down the global crude prices. OPEC has since changed itsstrategy after its November 2016 meeting in which OPEC agreedto cut production by 1.2 million bpd e�ective January 2017. Over thelonger term, North American production from tight oil plays, includingthe Bakken, is expected to grow as technology continues to improvewell productivity and reduce costs. The WCSB, in Canada, is viewedas one of the world’s largest and most secure supply sourcesof crude oil. However, the pace of growth in North America andlevel of investment in the WCSB could be tempered in future yearsby a number of factors including a sustained period of low crude oilprices and corresponding production decisions by OPEC, increasingenvironmental regulation, prolonged approval processes for newpipelines and the continuation of access restrictions to tide-waterin Canada for export.

In recent years, the combination of relatively flat domestic demand,growing supply and long-lead time to build pipeline infrastructure ledto a fundamental change in the North American crude oil landscape.The inability to move increasing inland supply to tide-water marketsresulted in a divergence between WTI and world pricing, resultingin lower netbacks for North American producers than couldotherwise be achieved if selling into global markets. The impactof price di�erentials has been even more pronounced for westernCanadian producers as insu�cient pipeline infrastructure resultedin a further discounting of Alberta crude against WTI. With a numberof market access initiatives completed by the industry in recentyears, including those introduced by Enbridge, the crude oil pricedi�erentials significantly narrowed in 2015, and resulted in higher


netbacks for producers. The di�erentials between WTI and world

pricing remained narrow in 2016. This has resulted in crude oil

continuing to move o� of alternative transportation networks such

as rail to fill the additional pipeline capacity as it became available.

However, Canadian pipeline export capacity is expected to remain

essentially full, resulting in incremental production utilizing non-pipeline

transportation services until such time as pipeline capacity is

made available. As the supply in North America continues to grow,

the growth and flexibility of pipeline infrastructure will need to keep

pace with the sensitive demand and supply balance. Over the longer

term, EIPLP believes pipelines will continue to be the most cost-

e�ective means of transportation in markets where the di�erential

between North American and global oil prices remain narrow.

Utilization of rail to transport crude is expected to be substantially

limited to those markets not readily accessible by pipelines. As prices

continue to remain sensitive to capacity limitations to markets, there

is a heightened need to expand access to coastal markets.

EIPLP’s and Enbridge’s role in helping to address the evolving

supply and demand fundamentals and alleviating price discounts

for producers and supply costs to refiners is to provide expanded

pipeline capacity and sustainable connectivity to alternative

markets. As discussed in Growth Projects, in 2016, EIPLP continued

to execute its growth projects plan in furtherance of this objective.

Supply and Demand for Natural Gas and NGL

Experiencing a similar price trend as crude oil, the prices of natural

gas and NGL and other commodities whose prices are highly

correlated to crude oil have also weakened. However, global energy

demand is expected to increase 30% by 2040, according to the

International Energy Agency, driven primarily by expected economic

growth from non-OECD countries. Natural gas will play an important

role in meeting this energy demand and is anticipated to grow

by 50% during this period as one of the world’s fastest growing energy

sources, second only to renewables. Most natural gas demand will

stem from the need for greater power generation capacity, as natural

gas is a cleaner alternative to coal, which currently has the largest

market share for power generation. Within North America, United

States natural gas demand growth is also expected to be driven

by the next wave of gas-intensive petrochemical facilities which

are now starting to enter service, along with the growing volume

of LNG exports. Over the longer term, higher United States natural

gas demand is expected to be driven by the industrial sector and

from power generation and will be supplemented by higher exports,

via liquefied natural gas (LNG) and to Mexico. Within Canada,

natural gas demand growth is expected to be largely tied to oil

sands development and growth in gas-fired power generation.

Canadian gas demand growth will be accelerated with

implementation of coal fired power replacements resulting

from impending legislation to meet emissions targets.

North American supply from tight formations continues to createa demand and supply imbalance for natural gas and some NGLproducts. North American gas supply continues to be significantlyimpacted by development in the northeastern United States,primarily the prolific Marcellus shale, and the rapidly growingUtica shale. The abundance of supply from these shale playscontinues to fundamentally alter natural gas flow patternsin North America, as this region has largely displaced flows fromthe Gulf Coast and the WCSB that historically supplied easternmarkets. Similar pressures are also being felt in the midwestand southern markets. Additional production is expected from thisregion as pipeline constraints are eliminated, with several proposedpipeline projects targeted for in-service over the next two years.

Natural gas production from regions other than the northeasternUnited States has largely been flat or has declined over thepast several years in the face of lower-cost production from theAppalachian region, in addition to prolonged weak North Americannatural gas prices. One exception would be WCSB production,reaching an all-time record high in early 2016, which was triggeredby the combination of new infrastructure and the connectionof previously drilled wells. Producers remain focused on the Montneyshale and the developing Duvernay, where core areas are amongthe most competitive within North America. Economic drivers varyand include: continuous productivity improvements overall, extremelylow cost dry gas plays and abundant liquids and/or condensate richgas resources, where liquid products enhance or drive economics.The highly prolific Permian Basin in West Texas/Southeast NewMexico is also experiencing significant benefit from technologyimprovements, where producer focus is primarily crude oil, however,with significant NGL-rich associated gas production. In the longerterm, while low natural gas prices are expected to be a key driverin future natural gas demand and infrastructure growth, producerbreak-even costs continue to decline and as a result it is expectedthere will continue to be ample economic supply that will respondquickly to rising demand, thereby limiting price advances.

Natural gas prices have been relatively weak over the last yearas a result of warm weather and high storage inventories; however,although rig counts have trended lower, production levels haveremained generally flat due to productivity gains, the high numberof drilled and uncompleted wells and continued focus on liquids-richand condensate plays. NGL that can be extracted from liquids-richgas streams include ethane, propane, butane and natural gasoline,which are used in a variety of industrial, commercial and otherapplications. The robust gas production has created regional supplyimbalances for some NGL products and weakened the economicsof NGL extraction, although these imbalances modestly improved overthe second half of 2016 as crude prices have rebounded and NGLexport capacity has expanded. Over the longer term, the growth inNGL demand is expected to be robust, driven largely by incremental


ethane demand. Ethane is the key feedstock to the United StatesGulf Coast petrochemical industry, which is the world’s secondlowest-cost ethylene production region and is currently undergoingsignificant expansion that has started to enter service and willaccelerate in 2017. When this new infrastructure is completed andfully online in late 2018, ethane prices and resulting extraction marginsare expected to improve, reducing the amount of ethane retained inthe gas stream. In addition, the inaugural export cargo of ethane wasshipped in March 2016 and if waterborne exports rise significantly,the ethane market will further tighten. Similarly, rapidly growing suppliesof propane have been outpacing demand leading to record storagelevels and downward pressure on prices. The outlook for abundantpropane supplies in excess of domestic demand has promptedthe development and expansion of export facilities for liquefiedpetroleum gas (LPG). Over a few short years, the United Stateshas become the world’s largest LPG exporter, with volumes reachingover one million bpd at times in 2016, which have helped to reducethe inventory overhang and provide support to propane prices.

In Canada, the WCSB basin is well-situated to capitalize on theevolving NGL fundamentals over the longer term as the Montneyformation in northern British Columbia and the Duvernay shalein Alberta contain significant liquids-rich resources at competitiveextraction costs. Longer-term, NGL fundamentals provide a positiveoutlook for growth and would be further supported with a continuedrecovery in crude oil prices. Consequently, the crude-to-gas priceratio is expected to remain well above energy conversion value levelsand continue to be supportive of NGL extraction over the longer term.

Conditions for western Canadian LNG exports remain favourable,as industry proponents continue to assess updated projecteconomics considering a scale down in construction costs, amplelower cost gas supplies and a stabilizing market, as supply/demandbegins to rebalance. Proponents who have the benefit of anintegrated model (upstream supply and downstream market) havethe greatest probability of making a favourable final investmentdecision. There continues to be regional opposition to proposedprojects in general, primarily stemming from a climate change/greenhouse gas (GHG) emissions agenda, mixed with some localIndigenous opposition as it relates to environmental impactson wildlife and fish habitats. The Government of British Columbiacontinues to advocate strongly for west coast LNG. The short termoutlook for LNG fundamentals points to a continued oversupply, as itwill take some time for the market to fully absorb the large volumesof new supply coming online. Post-2025, forecasts indicate demandwill exceed projected supply as growing markets seek to diversifysupply sources. This should be supportive of Canadian LNG exports.

In response to these evolving natural gas and NGL fundamentals,the Manager believes EIPLP is well-positioned to provide value-added solutions to producers. Alliance Pipeline traverses through theheart of key liquids-rich plays in the WCSB and is uniquely positioned

to transport liquids-rich gas. Alliance Pipeline has developed newservice o�erings to best meet the needs of producers and shippers,and demand for transportation services continues to be robust.

Supply and Demand for Renewable Energy

The power generation and transmission network in North Americais expected to undergo significant growth over the next 20 years.On the demand side, North American economic growth over thelonger term is expected to drive growing electricity demand, althoughcontinued e�ciency gains are expected to make the economyless energy-intensive and temper demand growth. On the supplyside, impending legislation in Canada is expected to acceleratethe retirement of aging coal-fired generation plants, resulting ina requirement for significant new generation capacity. While coaland nuclear facilities will continue to be core components of powergeneration in North America, gas-fired and renewable energyfacilities, including biomass, hydro, solar and wind, are expectedto be the preferred sources to replace coal-fired generation dueto their lower carbon intensities.

North American wind and solar resources fundamentals remainstrong. In the United States there is over 75 gigawatts (GW)of installed wind power capacity and in Canada over 11 GW ofinstalled wind power capacity. Solar resources in southwesternstates such as Arizona, California and Nevada are considered tobe some of the best in the world for large-scale solar plants and theUnited States currently has over 31 GW of installed solar photovoltaiccapacity. In late 2015, the United States passed legislation extendingthe availability of certain Federal tax incentives which have supportedthe profitability of wind and solar projects. However, expandingrenewable energy infrastructure in North America is not withoutchallenges. Growing renewable generation capacity is expectedto necessitate substantial capital investment to upgrade existingtransmission systems or, in many cases, build new transmission lines,as these high quality wind and solar resources are often found inregions that are not in close proximity to markets. In the near-term,uncertainty over the availability of tax or other government incentivesin various jurisdictions, the ability to secure long-term power purchaseagreements (PPA) through government or investor-owned powerauthorities and low market prices of electricity may hinder the paceof future new renewable capacity development. However, continuedimprovement in technology and manufacturing capacity in the pastfew years has reduced capital costs associated with renewableenergy infrastructure and has also improved yield factors of powergeneration assets. These positive developments are expectedto render renewable energy more competitive and support ongoinginvestment over the long term.

EIPLP has interests in 1,052 MW of net renewable energy generationand together with Enbridge, its sponsor, it will continue to seek newopportunities to expand its power generation business, growingits portfolio by investing in assets that meet its investment criteria.


Growth ProjectsThe following table summarizes the current status of EIPLP’s commercially secured projects, organizedby business segment. The estimated capital costs and the expenditures to date are inclusive of costsincurred prior to the closing of the 2015 Transaction.

EstimatedCapital Cost1

Expenditures to Date2

Expected In–Service Date Status

(Canadian dollars)

Liquids Pipelines

1. Norlite PipelineSystem3 $1.3 billion $0.8 billion 2017 Under construction

2. JACOSHangingstoneProject $0.2 billion $0.1 billion 2017 Under construction

3. RegionalOil SandsOptimizationProject $2.6 billion $2.2 billion 2017(in phases)

Under construction

4. Canadian Line 3Replacement Program 4 $4.9 billion $1.5 billion 2019 Pre–construction

1 These amounts are estimates and are subject to upward or downward adjustment based on various factors. Where appropriate, the amounts reflect EIPLP’s shareof joint venture projects.

2 Expenditures to date reflect total cumulative expenditures incurred from inception of the project up to December 31, 2016.3 EIPLP will construct and operate the Norlite Pipeline System (Norlite). Keyera Corp. (Keyera) will fund 30% of the project.4 As discussed under Canadian Line 3 Replacement Program below, the expected cost and in-service date of this project is under review by EIPLP in light of the schedule

for regulatory review and approval communicated by the Minnesota Public Utilities Commission (MNPUC) on October 28, 2016.

Liquids Pipelines

Norlite Pipeline System

EIPLP is undertaking the development of Norlite, a new industry diluent pipeline originating fromEdmonton, Alberta to meet the needs of multiple producers in the Athabasca oil sands region.The scope of the project was increased to a 24-inch diameter pipeline and based on current engineeringdesign, will provide an initial capacity of approximately 218,000 bpd of diluent, with the potential tobe further expanded to approximately 465,000 bpd of capacity with the addition of pump stations.Norlite will be anchored by throughput commitments from Suncor Energy Inc., Total E&P Canada Ltd.and Teck Resources Limited (Fort Hills Partners) for production from the proposed Fort HillsPartners’ oil sands project (Fort Hills Project) and from Suncor Energy Oil Sands Limited Partnership’s(Suncor Partnership) proprietary oil sands production. Norlite will involve the construction of a new449-kilometre (278-mile) pipeline from EIPLP’s Stonefell Terminal to its Cheecham Terminal with anextension to Suncor Partnership’s East Tank Farm, which is adjacent to EIPLP’s existing AthabascaTerminal. Under an agreement with Keyera, Norlite has the right to access certain existing capacityon Keyera’s pipelines between Edmonton, Alberta and Stonefell, Alberta and, in exchange, Keyerahas elected to participate in the new pipeline infrastructure project as a 30% non-operating owner.Norlite is expected to be completed in the second quarter of 2017 at an estimated cost of approximately$1.3 billion, with expenditures to date of approximately $0.8 billion.

JACOS Hangingstone Project

EIPLP is undertaking the construction of facilities and it will provide transportation services to the JapanCanada Oil Sands Limited (JACOS) Hangingstone Oil Sands Project (JACOS Hangingstone). JACOS andNexen Energy ULC, a wholly-owned subsidiary of China National O�shore Oil Corporation Limited, arepartners in the project which is operated by JACOS. EIPLP is constructing a new 53-kilometre (33-mile),12-inch lateral pipeline to connect the JACOS Hangingstone project site to EIPLP’s existing CheechamTerminal. The project, which will provide capacity of 40,000 bpd, has been delayed at the shippers’request and is targeted to enter service in the third quarter of 2017. The estimated cost of the projectis approximately $0.2 billion, with expenditures to date of approximately $0.1 billion.


Liquids Pipelines

1 Norlite Pipeline System

2 JACOS Hangingstone Project

3 Regional Oil Sands Optimization Project

4 Canadian Line 3 Replacement Program

* Assets in Operation include assets owned by EIPLP’s a�liate, Enbridge.

4

Blaine

Portland

Blaine

Portland

EdmontonHardisty

EdmontonHardisty

Fort McMurrayCheechamFort McMurrayCheecham

SuperiorSuperior

CushingCushing

HoustonHouston

WoodRiver

PatokaPatokaWoodRiver

Bu�alo

ToledoChicagoChicago

Bu�alo

Toledo

MontrealMontreal

ME

XIC

0

New OrleansNew Orleans

CANADA

UNITED STATESOF AMERICA

UNITED STATESOF AMERICA

GretnaGretna

Assets in Operation*

Growth Projects

Wind Assets in Operation

Solar Assets in Operation

Edmonton

Hardisty

Edmonton

Hardisty

Cheecham

Fort McMurrayFort McMurray

Cheecham

1 3

2

ToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledoToledo

New OrleansNew OrleansNew OrleansNew OrleansNew OrleansNew OrleansNew OrleansNew OrleansNew Orleans


Regional Oil Sands Optimization Project

As part of the Regional Oil Sands Optimization project, in January 2017EIPLP completed the twinning of the southern section of theAthabasca Pipeline with a 36-inch diameter pipeline from Kirby Lake,Alberta to the crude oil hub at Hardisty, Alberta. The initial capacityof the Athabasca Pipeline Twin is 450,000 bpd and it can befurther expanded in the future to 800,000 bpd through additionalpumping horsepower.

The Regional Oil Sands Optimization project also involves the upsizeof a 100-kilometre (60-mile) segment of the Wood Bu�alo Extensionbetween Cheecham, Alberta and Kirby Lake, Alberta from a 30-inchdiameter pipeline to a 36-inch diameter pipeline, which will connectto the origin of the Athabasca Pipeline Twin at Kirby Lake, Alberta.This component of the project is now expected to be in service inDecember 2017 to align with the primary shipper’s production profile.

The integrated Wood Bu�alo Extension and Athabasca PipelineTwin will transport diluted bitumen from the proposed Fort HillsProject in northeastern Alberta, as well as from oil sands productionfrom the Suncor Partnership in the Athabasca region. The AthabascaPipeline Twin portion of the project, after being placed into servicein January 2017, is also shipping blended bitumen from the CenovusChristina Lake Steam Assisted Gravity Drainage project near theorigin of the Athabasca Pipeline Twin.

The estimated total cost of the Regional Oil Sands OptimizationProject is approximately $2.6 billion, with expenditures to dateof approximately $2.2 billion.

Canadian Line 3 Replacement Program

In 2014, Enbridge and Enbridge Energy Partners, L.P. (EEP) jointlyannounced that shipper support was received for investment inthe Line 3 Replacement Program. The Canadian L3R Program willcomplement existing integrity programs by replacing approximately1,084 kilometres (673 miles) of the remaining line segments of theexisting Line 3 pipeline between Hardisty, Alberta and Gretna, Manitoba.

In April 2016, the National Energy Board (NEB) found thatthe Canadian L3R Program is in the Canadian public interestand issued final conditions and a recommendation to the FederalCabinet (the Cabinet) to issue the Certificate of Public Convenienceand Necessity (the Certificate) for the construction and operationof the pipeline and related facilities. A decision by the FederalCabinet was expected to be issued three months following the NEBrecommendation per legislation. However, because of the FederalGovernment’s January 27, 2016 announcement that, outside ofthe NEB process it had directed Federal agencies to conduct anassessment of direct and upstream GHG emissions and incrementalconsultation with a�ected communities and Indigenous peoples,the Minister of Natural Resources sought an extension of fourmonths to the Government’s legislated decision-making time limit

(to seven months in total). Regulatory approval was received fromthe Government of Canada on November 29, 2016 with no materialchanges to permit conditions and on December 1, 2016, the NEBissued the Certificate. Once the Certificate was issued, NaturalResources Canada released the final assessment of the upstreamGHG emissions, as well as reports summarizing the additionalCrown Consultation with Indigenous groups and the public onlinesurvey conducted by Natural Resources Canada.

The report assessing the upstream GHG emissions estimates thatthe upstream GHG emissions in Canada associated with the productionand processing of crude oil transported by the Canadian L3RProgram, based on a capacity of 760,000 bpd, could be between19 and 26 megatonnes of carbon dioxide equivalent per year.The report also found that the estimated emissions are not necessarilyincremental; the degree to which the estimated emissions wouldbe incremental depends on the expected price of oil, the availabilityand costs of other transportation modes, such as crude by rail, andwhether other pipeline projects are built. The Crown Consultationreport concluded that the NEB recommended conditions alongwith the commitments made by Enbridge are responsive to, andreasonably accommodate the project specific concerns raisedby Indigenous groups and that other concerns will be addressed bythe Government’s commitment to modernize the NEB and to reviewthe environmental assessment legislation. The report summarizingthe online survey states that 3,170 submissions were received inresponse to the questionnaire including from both individuals directlya�ected by the project, as well as general members of the public,and the report concluded that the majority of concerns centeredaround issues dealt with by the NEB including soil and ground watercontamination and impact to farmers and nearby communities.

In December 2016, the Manitoba Metis Federation and theAssociation of Manitoba Chiefs applied to the Federal Courtof Appeal for leave to judicially review the Government of Canada’sdecision to approve the Canadian L3R Program. The outcomeor timing of these proceedings, including their potential impactupon the Canadian L3R Program cannot be predicted at this time.

Subject to regulatory and other approvals, the Canadian L3R Programis targeted to be completed in 2019 at an estimated capital cost ofapproximately $4.9 billion, with expenditures to date of approximately$1.5 billion. With a delay in construction arising from a longer thananticipated permitting process, the cost of this project is expectedto increase. Also, in view of the MNPUC’s decision in respectof the schedule for the remainder of the regulatory approvalprocess for EEP’s United States portion of the Line 3 ReplacementProgram, EIPLP is reviewing the expected impact on the CanadianL3R Program’s schedule and cost estimates. It is possible thatthe in-service date could be delayed, at least until later in 2019.Costs of the Canadian L3R Program will be recovered througha 15-year toll surcharge mechanism under the CTS.


Liquids PipelinesEarnings Before Interest and Income Taxes

2016 2015 2014


CanadianMainline 931 355 –

RegionalOil SandsSystem 384 124 –

Southern Lights Pipeline 94 77 6

BakkenSystem 23 15 15

Feeder Pipelines andOther 80 69 60

Adjusted earnings before interest and income taxes 1,512 640 81

Retrospective adjustment – 2015Transaction1 – (324) 491

CanadianMainline – changes in unrealized derivative fair value gains/(loss) 467 (272) –

CanadianMainline – Line9Bcosts incurred during reversal – 1 –

RegionalOil SandsSystem–northeasternAlbertawildfires pipelines and facilities restart costs (47) – –

RegionalOil SandsSystem– leak insurance recoveries 5 22 –

RegionalOil SandsSystem–make-up rights adjustment (32) (5) –

Southern Lights Pipeline – changes in unrealized derivative fair value gains/(loss) 20 (87) (19)

Southern Lights Pipeline – realized gain on subscription price – – 22

BakkenSystem–make-up rights adjustment 1 2 –

Feeder Pipelines andOther – derecognition of regulatory balances (6) – –

Feeder Pipelines andOther – gain on sale of SouthPrairie Region assets 850 – –

Feeder Pipelines andOther – gain on sale of non-core assets – 22 –

Earnings/(loss) before interest and income taxes 2,770 (1) 575

1 In accordance with U.S. GAAP, EBIT for the years ended December 31, 2015 and 2014 has been retrospectively adjusted to furnish comparative information relatedto the 2015 Transaction. The impact of the retrospective adjustments has been removed from adjusted EBIT to reflect earnings generated under EIPLP’s ownership priorto September 1, 2015. Retrospective adjustments also include the impacts of significant, unusual, non-recurring or non-operating factors included in the retrospectivelyadjusted amounts for U.S. GAAP purposes.

Liquids Pipelines adjusted EBIT for the year ended December 31, 2016 increased compared with thecorresponding 2015 and 2014 periods, as a result of the incremental earnings from the assets acquired,most notably the Canadian Mainline and Regional Oil Sands System, as part of the 2015 Transaction.In addition to the significant increase as a result of the 2015 Transaction, adjusted EBIT increased dueto higher throughput on the Canadian Mainline and Regional Oil Sands System that resulted from strongoil sands production in western Canada enabled by pipeline capacity expansion projects placed intoservice in 2015. However, the positive e�ect of increased production and higher capacity on liquidspipelines throughput was substantially negated in the second quarter by the impact of extreme wildfiresin northeastern Alberta which led to a temporary shutdown of certain upstream pipelines and terminalfacilities resulting in a disruption of service on EIPLP’s Regional Oil Sands System with correspondingimpacts into and out of Enbridge’s downstream pipelines, including the Canadian Mainline, as discussedbelow. Growth in Canadian Mainline adjusted EBIT was also partially o�set by a combination of a loweraverage IJT Residual Benchmark Toll, which decreased e�ective April 1, 2016, and a lower foreignexchange rate on hedges used to convert United States dollar denominated toll revenues on theCanadian Mainline in 2016.

Additional details on items impacting Liquids Pipelines EBIT include:

• Canadian Mainline EBIT for 2016 and 2015 reflected changes in unrealized fair value gains andlosses primarily on derivative financial instruments used to risk manage exposures inherent withinthe CTS, namely foreign exchange, power cost variability and allowance oil commodity prices.

• Canadian Mainline EBIT for 2015 and 2014 included depreciation and expense charged to Line 9Bwhile it was idled and undergoing a reversal as part of EIPLP’s Eastern Access initiative.

• Regional Oil Sands System EBIT for 2016 included pipelines and facilities restart costs incurredas a result of the northeastern Alberta wildfires.

• Regional Oil Sands System EBIT for 2016 and 2015 included insurance recoveries associated withthe Line 37 crude oil release, which occurred in June 2013. Refer to Liquids Pipelines – Regional OilSands System – Line 37 Crude Oil Release.


• Regional Oil Sands System and Bakken System EBITfor 2016 and 2015 included make-up rights adjustments.For the purposes of adjusted EBIT, EIPLP reflects contributionsfrom these contracts rateably over the life of the contract,consistent with contractual cash payments under the contract.

• Southern Lights Pipeline EBIT for each year reflected changesin unrealized fair value gains and losses on derivative financialinstruments used to manage foreign exchange risk exposureon United States dollar cash flows from the Southern LightsClass A Units.

• Feeder Pipelines and Other EBIT for 2016 included a lossdue to the derecognition of regulatory assets following a tollsettlement for non-core assets.

• Feeder Pipelines and Other EBIT for 2016 reflected a gainon the sale of the South Prairie Region assets.

• Feeder Pipelines and Other EBIT for 2015 reflected a gainon the disposition of certain crude oil pipeline assets fromthe Virden System.

Impact of Wildfires in Northeastern Alberta

During the first week of May 2016, extreme wildfires in northeasternAlberta resulted in the shutdown of a number of oil sands productionfacilities and the evacuation of more than 80,000 people from thecity of Fort McMurray, which serves as a commercial and regionallogistics centre for the oil sands region and a home to a significantportion of the oil sands workforce.

EIPLP’s facilities in the region were largely una�ected; however,as a precautionary measure on May 4, 2016, EIPLP temporarily shutdown and evacuated its Cheecham Terminal and curtailed operationsat its Athabasca Terminal. EIPLP also isolated and shut downpipelines in and out of the Cheecham Terminal and shut downor curtailed operations on other pipelines it operates in the region.

EIPLP coordinated with emergency response, public safety andutility o�cials to restore power and make any necessary repairsto its systems while working closely with producers in the region.The majority of EIPLP’s Regional Oil Sands System were restartedand returned to normal operation by the end of May 2016.

Oil sands production from facilities in the vicinity of Fort McMurray,Alberta was curtailed longer given the severity and longevityof the wildfires, with oil sands production substantially coming backonline by the end of June 2016. On average, EIPLP’s mainline systemdeliveries were lower by approximately 255,000 bpd during themonths of May and June 2016, which represented an approximate10% decrease in throughput compared with the throughput thatEIPLP was delivering prior to the wildfires. In the second half of 2016,throughput on the Canadian Mainline and overall system utilizationstrengthened. As a result, the negative impact of reduced systemdeliveries on revenues impacting EIPLP’s adjusted EBIT and ACFFOfor the year ended December 31, 2016 remained unchanged sincethe end of the second quarter of 2016 at approximately $36 million.

Canadian Mainline

The Canadian Mainline is a common carrier pipeline system whichtransports various grades of oil and other liquid hydrocarbons withinwestern Canada and from western Canada to the Canada/UnitedStates border near Gretna, Manitoba and Neche, North Dakota andfrom the United States/Canada border near Port Huron, Michiganand Sarnia, Ontario to eastern Canada and the northeastern UnitedStates. The Canadian Mainline includes six adjacent pipelines, witha combined design operating capacity of approximately 2.85 millionbpd that connect with Enbridge’s Lakehead System at the Canada/United States border, as well as four crude oil pipelines and onerefined products pipeline that deliver into eastern Canada and thenortheastern United States. It also includes certain related pipelinesand infrastructure, including decommissioned and deactivatedpipelines. Enbridge Pipelines Inc. (EPI), a wholly-owned subsidiaryof EIPLP, has operated, and frequently expanded, the CanadianMainline since 1949.

Competitive Toll Settlement

The CTS is the current framework governing tolls paid for productsshipped on the Canadian Mainline, with the exception of Lines 8 and9 which are tolled on a separate basis. The 10-year settlement wasnegotiated by representatives of EPI, the Canadian Association ofPetroleum Producers and shippers on the Canadian Mainline. It wasapproved by the NEB on June 24, 2011 and took e�ect on July 1, 2011.The CTS provides for a Canadian Local Toll (CLT) for deliverieswithin western Canada, which is based on the 2011 Incentive TollingSettlement toll, as well as an IJT for crude oil shipments originatingin western Canada on the Canadian Mainline and delivered into theUnited States, via Enbridge’s Lakehead System, and into easternCanada. These tolls are denominated in United States dollars.The IJT is designed to provide shippers on the Canadian Mainlinewith a stable and competitive long-term toll, thereby preserving andenhancing throughput on both the Canadian Mainline and LakeheadSystem. The IJT and the CLT were both established at the timeof implementation of the CTS and are adjusted annually, on July 1of each year, at a rate equal to 75% of the Canada Gross DomesticProduct at Market Price Index published by Statistics Canada.Certain events may trigger a renegotiation of the CTS by EPIor the shippers. These include (i) a regulatory change that results incumulative capital expenditures for integrity work on the CanadianMainline increasing by more than $100 million, or (ii) if the nine monthaverage volume on the Canadian Mainline, ex-Gretna, Manitoba,falls below the minimum threshold volume (currently 1.35 million bpd).If a renegotiation of the CTS is triggered, EPI and the shippers willmeet and use reasonable e�orts to agree on how the CTS can beamended to accommodate the event. If EPI and the shippers areunable to agree on the manner in which the CTS is to be amended,then, absent an extension to the renegotiation period, the CTS willterminate and EPI will need to file a new toll application with the NEBfor the Canadian Mainline. Two years prior to the end of the term ofthe CTS, EPI and the shippers will establish a group for the purposesof negotiating a new settlement to replace the CTS once it expires.


Although the CTS has a 10-year term, it does not require shippersto commit to certain volumes. Shippers nominate volumes on amonthly basis and EPI allocates capacity to maximize the e�ciencyof the Canadian Mainline.

Local tolls for service on Enbridge’s Lakehead System are nota�ected by the CTS and continue to be established pursuant tothe Lakehead System’s existing toll agreements. Under the termsof the IJT agreement between Enbridge and EEP, the CanadianMainline’s share of the IJT toll relating to pipeline transportationof a batch from any western Canada receipt point to the UnitedStates border is equal to the IJT toll applicable to that batch’s UnitedStates delivery point less the Lakehead System’s local toll to thatdelivery point. This amount is referred to as the Canadian Mainline IJTResidual Benchmark Toll and is denominated in United States dollars.

Results of Operations

Canadian Mainline adjusted EBIT was $931 million for the year endedDecember 31, 2016 compared with $355 million for the year endedDecember 31, 2015. The increase in adjusted EBIT is primarily dueto the incremental earnings from the acquisition of the CanadianMainline in the 2015 Transaction.

Canadian Mainline EBIT is largely impacted by volume throughputachieved on the system. In addition to the substantial increase as aresult of the 2015 Transaction, adjusted EBIT increased due to higherthroughput driven by strong oil sands production in western Canadaenabled by pipeline capacity expansion projects placed into servicein 2015, the most prominent being the expansion of the CanadianMainline completed in the third quarter of 2015 and the reversaland expansion of Line 9B completed in the fourth quarter of 2015,as well as new surcharges for certain system expansions, includingthe Edmonton to Hardisty Expansion that was completed in thesecond quarter of 2015. Higher throughput on the Canadian Mainlinealso reflected increased downstream demand throughout 2016 fromthe completion of other projects operated by Enbridge in the fourthquarter of 2015. The positive e�ect of increased production andhigher capacity on Canadian Mainline throughput discussed abovewas substantially negated in the second quarter of 2016 by theimpact of extreme wildfires in northeastern Alberta. The wildfiresresulted in a curtailment of production from oil sands facilities andcertain upstream pipelines and terminal facilities were temporarilyshut down resulting in a disruption of service on EIPLP’s RegionalOil Sands System with corresponding impacts on deliveries to itsdownstream pipelines, including the Canadian Mainline. In the thirdquarter of 2016, throughput on the Canadian Mainline system andoverall system utilization strengthened. The impact of the wildfiresfor the year ended December 31, 2016 on Canadian Mainlineadjusted EBIT has remained unchanged since the end of the secondquarter of 2016 at approximately $30 million, as discussed above.

Year-over-year growth in Canadian Mainline adjusted EBIT wasalso a�ected by a lower average Canadian Mainline IJT ResidualBenchmark Toll. E�ective April 1, 2016, Canadian Mainline IJTResidual Benchmark Toll decreased from US$1.63 to US$1.46,which more than o�set the e�ects of the higher toll charged duringthe first quarter of 2016. E�ective July 1, 2016, Canadian MainlineIJT Residual Benchmark Toll increased slightly to US$1.47 forthe remainder of the year.

In addition, Canadian Mainline adjusted EBIT reflected the impactof a lower period-over-period exchange rate used to recordthe Canadian Mainline revenues. The IJT Benchmark Toll andits components are set in United States dollars and the majorityof EIPLP’s foreign exchange risk on Canadian Mainline revenueis hedged. For the year ended December 31, 2016, the e�ectivehedged rate for the translation of Canadian Mainline United Statesdollar transactional revenues was $1.07 compared with $1.10 forthe corresponding 2015 period.

In addition to the factors noted above, which partially o�set theincrease in Canadian Mainline adjusted EBIT for the year endedDecember 31, 2016, higher power costs associated with higherthroughput and higher operating and administrative expense tosupport increased business activities also partially o�set the increase.

Canadian Mainline adjusted EBIT was $355 million for the yearended December 31, 2015 compared with nil for the year endedDecember 31, 2014. In addition to the significant increase inadjusted EBIT as a result of the 2015 Transaction, throughputon the Canadian Mainline was stronger largely due to strong oilsands production, ongoing e�orts to optimize capacity utilization,and enhanced scheduling e�ciency with shippers. However, furtherthroughput growth in late third and fourth quarters of 2015 washindered by upstream plant maintenance in Alberta which impactedlight volumes and an unplanned shutdown of a midwest refinery thatimpacted the takeaway of heavy volumes, although these e�ectswere alleviated towards the latter part of the fourth quarter of 2015.Canadian Mainline fourth quarter adjusted EBIT also reflected onemonth of revenues from Line 9B which was placed into servicein December 2015.


Throughput Volume1

Q1 Q2 Q3 Q4 Full Year

(thousands of bpd)

2016 2,543 2,242 2,353 2,481 2,405

20152 – – 2,221 2,243 2,238

1 Average throughput volume represents mainline deliveries ex-Gretna, Manitoba which is made up of United States and eastern Canada deliveries originating from western Canada.2 Throughput volumes are representative of EIPLP’s ownership period of the Canadian Mainline.

Regional Oil Sands System

The Regional Oil Sands System includes three intra-Alberta long haul pipelines, the Athabasca Pipeline,Waupisoo Pipeline and Woodland Pipeline, and two large terminals: the Athabasca Terminal located northof Fort McMurray, Alberta and the Cheecham Terminal, located south of Fort McMurray. The Regional OilSands System also includes the Wood Bu�alo Pipeline and Norealis Pipeline, each of which providesaccess for oil sands production from north of Fort McMurray to the Cheecham Terminal. There arealso other facilities such as the MacKay River, Christina Lake, Surmont, Long Lake and AOC lateralsand related facilities. Regional Oil Sands System currently serves nine producing oil sands projects.

The Athabasca Pipeline is a 540-kilometre (335-mile) synthetic and heavy oil pipeline. Built in 1999,it links the Athabasca oil sands in the Fort McMurray region to the major Alberta pipeline hub at Hardisty,Alberta. The Athabasca Pipeline’s capacity is 570,000 bpd depending on crude slate. EIPLP has long-term take-or-pay and non take-or-pay agreements with multiple shippers on the Athabasca Pipeline.Revenues are recorded based on the contract terms negotiated with the major shippers, rather thanthe cash tolls collected. In January 2017, EIPLP also completed the twinning of the southern sectionof the Athabasca Pipeline with a 36-inch diameter pipeline from Kirby Lake, Alberta to its Hardisty crudeoil hub, as discussed under Growth Projects – Liquids Pipelines – Regional Oil Sands Optimization Project.

The Waupisoo Pipeline is a 380-kilometre (236-mile) synthetic and heavy oil pipeline that entered servicein 2008 and provides access to the Edmonton market for oil sands producers. The Waupisoo Pipelineoriginates at the Cheecham Terminal and terminates at the major Alberta pipeline hub at Edmonton.The pipeline has a capacity of 550,000 bpd, depending on crude slate. EIPLP has long-term take-or-paycommitments with multiple shippers on the Waupisoo Pipeline who have collectively contracted for 80%to 90% of the capacity, subject to the timing of when shippers’ commitments commence and expire.

The Woodland Pipeline consists of Line 49 and Line 70 (Woodland Pipeline Extension) which wereconstructed in phases. In 2012, EIPLP entered into a transportation agreement with Imperial OilResources Ventures Limited (IORVL) and ExxonMobil Canada Properties (ExxonMobil) to providefor the transportation of blended bitumen from the Kearl oil sands mine to the major Alberta pipelinehub at Edmonton. The construction of the Woodland Pipeline was phased with the Kearl oil sands mineexpansion, with the first phase involving construction of a 140-kilometre (87-mile) 36-inch diameterpipeline from the mine to the Cheecham Terminal, and service on EIPLP’s existing Waupisoo Pipelinefrom Cheecham to the Edmonton area. The completed Woodland Pipeline (Line 49) was placedinto service in 2013, commensurate with the start-up of the Kearl oil sands mine. The second phaseinvolved the Woodland Pipeline Extension project, which under a joint venture among EIPLP, IORVLand ExxonMobil, extended the Woodland Pipeline south from EIPLP’s Cheecham Terminal to itsEdmonton Terminal. The extension involved the construction of a 385-kilometre (239-mile), 36-inchdiameter pipeline which was completed and entered service in 2015, adding 379,000 bpd of capacityto the Regional Oil Sands System. EIPLP has long-term commitments on the Woodland Pipeline.


Regional Oil Sands System adjusted EBIT was $384 million for the year ended December 31, 2016compared with $124 million for the year ended December 31, 2015. The increase in adjusted EBITis primarily due to the incremental earnings from the acquisition of the Regional Oil Sands Systemin the 2015 Transaction.

In addition to the substantial increase as a result of the 2015 Transaction, adjusted EBIT increased dueto contributions from assets placed into service in the second half of 2015, including the Sunday CreekTerminal and Woodland Pipeline Extension projects that were placed into service in the third quarterof 2015 and the AOC Hangingstone Lateral which was completed in December 2015. Regional OilSands System adjusted EBIT also benefitted from higher contracted volumes on Waupisoo Pipeline


in the fourth quarter of 2016 compared with the fourth quarterof 2015. However, the year-over-year increase in adjusted EBITwas partially o�set by the e�ects of the wildfires in northeasternAlberta during the second quarter of 2016, discussed above,which negatively impacted Regional Oil Sands System adjustedEBIT by approximately $6 million.

Regional Oil Sands System adjusted EBIT was $124 million forthe year ended December 31, 2015 compared with nil for the yearended December 31, 2014. As discussed above, the increase inadjusted EBIT is due to the incremental earnings from the acquisitionof the Regional Oil Sands System in the 2015 Transaction.

Line 37 Crude Oil Release

On June 22, 2013, Enbridge reported a release of an estimated1,300 barrels of light synthetic crude oil on its Line 37 pipelineapproximately two kilometres north of the Cheecham Terminal.The release was caused by unusually high water levels in the regionthat triggered ground movement on the right-of-way. The oil releasedfrom Line 37 was recovered and on July 11, 2013, Line 37 returnedto service at reduced operating pressure. Normal operating pressurewas restored on July 29, 2013 after finalization of geotechnicalanalysis. Investigations into the incident conducted by the AlbertaEnergy Regulator and Environment Canada were completed andclosed without any penalties or fines being imposed on Enbridge.

For the years ended December 31, 2015 and 2014, EIPLP’sEBIT reflected remediation and long-term stabilization costsof approximately $6 million and $6 million before insurancerecoveries, respectively. Lost revenues associated with the shutdownof Line 37 and the pipelines sharing a corridor with Line 37 wereminimal. At the time of the Line 37 crude oil release, Enbridge carriedliability insurance for sudden and accidental pollution events, subjectto a $10 million deductible.

The integrity and stability costs associated with remediating theimpact of the high water levels were precautionary in nature andnot covered by insurance. Enbridge expects to record receivablesfor amounts claimed for recovery pursuant to its insurance policiesduring the period that it deems realization of the claim for recoveryto be probable.

For the years ended December 31, 2016, 2015 and 2014, insurancerecoveries of $5 million, $32 million and $11 million, respectively,were recognized in EIPLP’s EBIT in connection with the Line 37 crudeoil release. Recoveries of $5 million and $22 million were receivedsubsequent to the 2015 Transaction and recognized in EIPLP’s EBITfor the years ended December 31, 2016 and 2015, respectively.


Southern Lights Pipeline is a fully-contracted single stream pipelinethat ships diluent from the Manhattan Terminal near Chicago, Illinoisto three western Canadian delivery facilities, located at the Edmontonand Hardisty terminals in Alberta and the Kerrobert terminal inSaskatchewan. This 180,000 bpd 16/18/20-inch diameter pipelinewas placed into service mid-2010. Prior to the close of the 2015Transaction, Southern Lights Canada was owned by SL Canada,an Alberta limited partnership. Southern Lights US is owned byEnbridge Pipelines (Southern Lights) L.L.C., a Delaware limited liabilitycompany. Both Southern Lights Canada and Southern Lights US

receive tari� revenues under long-term contracts with committedshippers. Tari�s provide for recovery of all operating and debtfinancing costs plus a return on equity (ROE) of 10%. Southern LightsPipeline has assigned 10% of the capacity (18,000 bpd) for shippersto ship uncommitted volumes.

On November 7, 2014, wholly-owned subsidiaries of EIPLP subscribedfor and purchased the Class A units of certain Enbridge subsidiarieswhich provide a defined cash flow stream and represent the equitycash flows derived from the core rate base of the Southern LightsPipeline until June 30, 2040. Payments are received quarterly, eachof which is comprised of return on and return of capital components.The return on capital is included in income for the period andthe return of capital reduces the balance of the investment on theConsolidated Statements of Financial Position. Enbridge guaranteedpayment of the distributions except in circumstances of forcemajeure, certain regulatory actions and shipper defaults thatremain unrecovered under the shipper contracts. EIPLP has optionsto negotiate extensions for two additional 10-year terms beyond2040 and to participate in equity returns from future expansionsof the Southern Lights Pipeline.

Following the close of the 2015 Transaction, EIPLP indirectly ownsall of the Class B units of Southern Lights Canada, together withthe Class A units it already owned. As a result EIPLP holds all theownership, economic interests and voting rights, direct and indirect,in Southern Lights Canada. The Enbridge guarantee providedin respect of distributions on the Class A units of Southern LightsCanada was released upon closing of the 2015 Transaction.

EIPLP did not acquire any additional direct or indirect interestsin Southern Lights US pursuant to the 2015 Transaction.Following closing, EIPLP continues to indirectly own all ofthe Class A units of Southern Lights US and Enbridge continuesto indirectly own all of the Class B units of Southern Lights US.


Southern Lights adjusted EBIT was $94 million for the year endedDecember 31, 2016 compared with $77 million for the year endedDecember 31, 2015. The increase in adjusted EBIT is primarily dueto the acquisition of Southern Lights Canada as part of the 2015Transaction as well as a higher recovery of negotiated depreciationrates in 2016 transportation tolls.

Southern Lights adjusted EBIT was $77 million for the yearended December 31, 2015 compared with $6 million for the yearended December 31, 2014. In addition to the increase as a resultof the 2015 Transaction, adjusted EBIT primarily increased dueto the earnings in respect of the Southern Lights Class A Unitsfollowing the close of the 2014 Transaction in November 2014.

Bakken System

The Bakken System delivers crude oil production from Enbridge’sterminal in North Dakota to Cromer, Manitoba, where productsenter the mainline system to be transported to the United States oreastern Canada. An expansion of the Bakken System was completedin 2013, which added 145,000 bpd of new capacity to accommodateproduction from the Bakken and Three Forks formations locatedin North Dakota. EIPLP owns the Canadian segment of the BakkenSystem and EEP owns the United States segment.


The Bakken System is categorized as a Group 2 pipeline, and assuch its tolls are regulated by the NEB on a complaint basis. Tolls arebased on long-term take-or-pay agreements with anchor shippers.


Bakken System adjusted EBIT was $23 million for the year endedDecember 31, 2016 compared with $15 million for the year endedDecember 31, 2015. The increase in adjusted EBIT is primarily dueto increased downstream demand resulting from the reversal andexpansion of Line 9B completed in the fourth quarter of 2015.

Bakken System adjusted EBIT remained consistent at $15 millionfor the year ended December 31, 2015 and 2014. Higher throughputin 2015 was o�set by lower average tolls and higher operatingand administrative expenses.

Feeder Pipelines and Other

Feeder Pipelines and Other includes the Hardisty Contract Terminaland Hardisty Storage Caverns located near Hardisty, Alberta, a keycrude pipeline hub in western Canada.

Also reported in Feeder Pipelines and Other results are contributionsfrom the South Prairie Region assets which transport crude oiland NGL from producing fields and facilities in southeasternSaskatchewan and southwestern Manitoba to Cromer, Manitobawhere products enter the mainline system to be transported tothe United States or eastern Canada. On December 1, 2016, EIPLPsold the South Prairie Region assets within Feeder Pipelinesand Other to an unrelated party for cash proceeds of $1.08 billion.


Feeder Pipelines and Other adjusted EBIT was $80 million forthe year ended December 31, 2016 compared with $69 millionfor the year ended December 31, 2015. The increase in adjustedEBIT is primarily due to increased demand for crude oil storageat the Hardisty Contract Terminal, which was partially o�setby the absence of EBIT from the South Prairie Region assetsin the month of December 2016.

Feeder Pipelines and Other adjusted EBIT was $69 millionfor the year ended December 31, 2015 compared with $60 millionfor the year ended December 31, 2014. The increase in adjusted EBITreflected higher throughput in 2015 from the South Prairie Region.This was driven by volumes returning to the system from alternativetransportation sources, such as rail.

Business Risks

The risks identified below are specific to the Liquids Pipelinesbusiness. General risks that a�ect EIPLP as a whole aredescribed under Risk Management and Financial Instruments –General Business Risks.

Asset Utilization

EIPLP is exposed to throughput risk under the CTS on theCanadian Mainline and under certain tolling agreements applicableto other Liquids Pipelines assets and the Lakehead Mainline Systemowned by EEP. A decrease in volumes transported can directly and

adversely a�ect revenues and earnings. Factors such as changingmarket fundamentals, capacity bottlenecks, operational incidents,regulatory restrictions, system maintenance and increased competitioncan all impact the utilization of the Liquids Pipelines assets.

Market fundamentals, such as commodity prices and pricedi�erentials, weather, gasoline prices and consumption, alternativeenergy sources and global supply disruptions outside of EIPLP’scontrol can impact both the supply of and demand for crude oiland other liquid hydrocarbons transported on EIPLP’s pipelines.In the second quarter of 2016, extreme wildfires in northeasternAlberta resulted in a temporary curtailment of oil sands productionfrom facilities in the vicinity of Fort McMurray, Alberta, resulting in anegative impact on EIPLP’s adjusted EBIT and ACFFO as discussedabove. However, the long-term outlook for Canadian crude oilproduction, particularly from western Canada, and increasing UnitedStates domestic production indicates a growing source of potentialsupply of crude oil.

EIPLP seeks to mitigate utilization risks within its control. The marketaccess expansion initiatives, which have had components placedinto service over the past several years, and those currently underdevelopment have and are expected to further reduce capacitybottlenecks and enhance access to markets for customers. EIPLPalso seeks to optimize capacity and throughput on its existing assetsby working with the shipper community to enhance schedulinge�ciency and communications, as well as make continuousimprovements to scheduling models and timelines to maximizethroughput. EIPLP is also undertaking the Canadian L3R Program,which upon completion, will support the safety and operationalreliability of the overall system and enhance the flexibility on themainline system allowing EIPLP to further optimize throughput.Throughput risk is partially mitigated by provisions in the CTSagreement, which allow EIPLP to adjust the applicable CanadianL3R Program surcharge if volumes fall below defined thresholdsor to negotiate an amendment to the agreement in the event certainminimum threshold volumes are not met.

Interdependence with the Lakehead System

Enbridge’s mainline system is an integrated system whichtransports liquids hydrocarbons between receipt and deliverypoints across Canada and the United States. The integration ofthe Canadian Mainline and Enbridge’s Lakehead System resultsin an interdependence of the two systems, such that operationalfactors on one system may impact the other system. Such factorsmay include, but are not limited to, volume throughput increasesor decreases, capacity bottlenecks, operational incidents, regulatoryrestrictions or system maintenance. Any such factor, individually,in combination or over a prolonged period of time, could havea material adverse e�ect on cash flows or the financial conditionof EIPLP and therefore could impact distributions. The CTSframework also results in the Lakehead System having an impacton revenues generated by the Canadian Mainline. Since the LakeheadSystem local tolls are determined under a tolling agreement which isseparate from CTS, changes in the Canadian Mainline IJT ResidualBenchmark Toll are inversely related to Lakehead System local tolls.


Operational and Economic Regulation

Operational regulation risks relate to failing to comply with applicableoperational rules and regulations from government organizationsand could result in fines or operating restrictions or an overallincrease in operating and compliance costs.

Regulatory scrutiny over the integrity of liquids pipelines assetshas the potential to increase operating costs or limit future projects.Potential regulatory changes could have an impact on EIPLP’s futureearnings and the cost related to the construction of new projects.EIPLP and the Manager believe operational regulation risk ismitigated by active monitoring and consulting on potential regulatoryrequirement changes with the respective regulators or throughindustry associations. EIPLP also develops robust response plansto regulatory changes or enforcement actions. While the Managerbelieves the safe and reliable operation of its assets and adherenceto existing regulations is the best approach to managing operationalregulatory risk, the potential remains for regulators to make unilateraldecisions that could have a financial impact on EIPLP.

EIPLP’s liquids pipelines also face economic regulatory risk.Broadly defined, economic regulation risk is the risk regulatorsor other government entities change or reject proposed or existingcommercial arrangements including permits and regulatory approvalsfor new projects. The Canadian Mainline, Enbridge’s LakeheadSystem and other liquids pipelines are subject to the actionsof various regulators, including the NEB, with respect to thetari�s and tolls of those operations. The changing or rejectingof commercial arrangements, including decisions by regulatorson the applicable tari� structure or changes in interpretationsof existing regulations by courts or regulators, could have an adversee�ect on EIPLP’s revenues and earnings. Delays in regulatoryapprovals could result in cost escalations and construction delays,which also negatively impact EIPLP’s operations.

The Manager believes that economic regulatory risk is reducedthrough the negotiation of long-term agreements with shippers thatgovern the majority of EIPLP’s liquids pipeline assets. The Manageralso involves its legal and regulatory teams in the review of newprojects to ensure compliance with applicable regulations as wellas in the establishment of tari�s and tolls on new and existingpipelines. However, despite the e�orts to mitigate economicregulation risk, there remains a risk that a regulator could overturnlong-term agreements between EIPLP and shippers or denythe approval and permits for new projects.

Renewal of Line 5 Easement

On January 4, 2017, the Tribal Council of the Bad River Band of LakeSuperior Tribe of Chippewa Indians (the Band), located in Wisconsin,voted not to renew its interest in certain Line 5 easements throughthe Bad River Reservation. Line 5 is included within Enbridge’smainline system and it runs from Superior, Wisconsin to Sarnia,Ontario. The Canadian portion of Line 5 is owned by EIPLP andis located within the Canadian Mainline. The Band’s resolution calls

for decommissioning and removal of the pipeline from all Bad Riverlands and watershed. The Tribal Resolution may impact EIPLP’sability to operate the Canadian portion of Line 5. Since the Bandpassed the resolution, the parties have held discussions about thepossibility of engaging in a facilitated mediation process, with theobjective of resolving the Band’s concerns on a long-term basis.

Competition

Competition may result in a reduction in demand for EIPLP’s services,fewer project opportunities or assumption of risk that resultsin weaker or more volatile financial performance than expected.Competition among existing pipelines is based primarily on thecost of transportation, access to supply, the quality and reliabilityof service, contract carrier alternatives and proximity to markets.

Other competing carriers available to ship western Canadianliquid hydrocarbons to markets in Canada, the United States andinternationally represent competition to EIPLP’s liquids pipelinesnetwork, including those held by EIPLP. Competition also arisesfrom proposed pipelines that seek to access markets currentlyserved by EIPLP’s liquids pipelines, such as proposed projectsto eastern markets. Competition also exists from proposed projectsenhancing infrastructure in the Alberta regional oil sands market.The Bakken systems also face competition from existing competingpipelines, proposed future pipelines and existing and alternativegathering facilities. Additionally, volatile crude price di�erentialsand insu�cient pipeline capacity on either EIPLP or other competitorpipelines can make transportation of crude oil by rail competitive,particularly to markets not currently serviced by pipelines.

The Manager believes that liquids pipelines continue to provideattractive options to producers in the WCSB due to its competitivetolls and flexibility through its multiple delivery and storage points.The current complement of growth projects, including thosein execution, to expand market access and to enhance capacityon EIPLP’s pipeline system combined with EIPLP’s commitmentto project execution is expected to further provide shippersreliable and long-term competitive solutions for oil transportation.EIPLP’s existing right-of-way for the mainline system also provides acompetitive advantage as it can be di�cult and costly to obtain rightsof way for new pipelines traversing new areas. EIPLP also employslong-term agreements with shippers, which mitigate competitionrisk by ensuring consistent supply to its liquids pipelines network.

Foreign Exchange and Interest Rate Risk

The CTS agreement for the Canadian Mainline exposes EIPLP to risksrelated to movements in foreign exchange rates and interest rates.Foreign exchange risk arises as the IJT under the CTS is charged inUnited States dollars. These risks have been substantially managedthrough Enbridge’s enterprise-wide hedging program by using financialcontracts to fix the prices of United States dollars and interest rates.Certain of these financial contracts do not qualify for cash flowhedge accounting and, therefore, EIPLP’s earnings are exposedto associated changes in the mark-to-market value of these contracts.


Gas PipelinesEarnings Before Interest and Income Taxes

2016 2015 2014


GasPipelines 184 151 74

Adjusted earnings before interest and income taxes 184 151 74

Retrospective adjustment – 2014Transaction1 – – 64

GasPipelines – changes in unrealized derivative fair value gains/(loss) 10 (15) (6)

GasPipelines – derecognition of regulatory balances – 8 –

Earnings before interest and income taxes 194 144 132

1 In accordance with U.S. GAAP, EBIT has been retrospectively adjusted to reflect the 2014 Transaction prior to the e�ective date of the transaction. The impact of the retrospectiveadjustments has been removed from adjusted EBIT to reflect earnings generated under EIPLP’s ownership prior to November 7, 2014.

Additional details on items impacting Gas Pipelines EBIT include:

• Earnings from Alliance Pipeline US for each year reflected changes in unrealized gains and losseson derivative financial instruments used to manage foreign exchange exposures associated withUnited States dollar denominated distributions from Alliance Pipeline US.

• EIPLP’s equity earnings from Alliance Pipeline were impacted by the derecognition of regulatoryliabilities within those entities in the second quarter of 2015.

Alliance Pipeline System

Gas Pipelines consists of Alliance Pipeline, a 3,000-kilometre natural gas mainline pipeline andapproximately 860 kilometres of lateral pipelines and related infrastructure. The Alliance Pipeline Canadaportion begins near Aiken Creek, British Columbia and connects to Alliance Pipeline US at the Canada/United States border near Elmore, Saskatchewan, where it continues to the Aux Sable gas processingplant near Chicago, Illinois and the Alliance Chicago gas exchange hub. Alliance Pipeline has annualfirm transportation service shipping contract capacity of 1,325 million cubic feet per day (mmcf/d)and 1,455 mmcf/d, respectively.

Indirect wholly-owned subsidiaries of EIPLP acquired a 50% interest in Alliance Pipeline US from indirectwholly-owned subsidiaries of Enbridge on November 7, 2014. Refer to Overview – The 2014 Transaction.

Alliance Pipeline New Services Framework

E�ective December 1, 2015, Alliance Pipeline commenced operations under its New Services Framework.Prior to December 1, 2015, Alliance Pipeline successfully re-contracted its annual firm service capacitywith an average contract length of approximately five years. As part of the Canadian portion of the NewServices Framework, the NEB granted pricing discretion for interruptible transportation and seasonal firmservice with all associated revenues accruing to Alliance Pipeline Canada. The Federal Energy RegulatoryCommission (FERC), as part of its acceptance of the New Services Framework, set all issues relatedto the proposed elimination of Authorized Overrun Service and Interruptible Transportation revenuecrediting, and the maintenance of Alliance Pipeline US’ existing recourse rates, for hearing. In 2016, theFERC expanded the issues set for hearing to include aspects of the Alliance Pipeline US tari� that relatesto liquids extraction requirements. The FERC approved Alliance Pipeline US’ negotiated rate contracts,which are not set for hearing. Throughout 2016, Alliance Pipeline US conducted settlement hearingswith all interested parties, which culminated in the certification of a contested settlement issued to theFERC Commissioners on September 6, 2016 by a FERC Administrative Law Judge. No Alliance PipelineUS customer contested the settlement. On December 15, 2016, the FERC Commissioners approvedessentially all aspects of the contested settlement, except for the liquids extraction matter, whichhas been set for hearing, with any outcomes to be e�ective on a prospective basis. Alliance Pipelinehas accepted the approved portions of the FERC Commissioners’ decision and is seeking rehearingof the decision regarding liquids extraction.


Pursuant to the New Services Framework, Alliance Pipeline retains exposure to potential variabilityin revenues generated from market based services provided beyond contracted annual firm transportservice, as well as certain future costs. As such, the majority of Alliance Pipeline’s operations no longermeet all of the criteria required for the continued application of rate-regulated accounting treatment anda derecognition of regulatory balances was recorded in the second quarter of 2015. As a result, EIPLP’s2015 equity pick-up of Alliance Pipeline, recorded in the Gas Pipelines segment, included a one-time,non-cash pre-tax gain of $8 million due to the derecognition of regulatory liabilities within AlliancePipeline. Further, EIPLP recorded a one-time, non-cash loss of $16 million related to a regulatory assetEIPLP had recorded in respect of Alliance Pipeline Canada deferred tax within Eliminations and Other.

Alliance Pipeline Transportation Services Agreements

Prior to December 1, 2015, Alliance Pipeline Canada had transportation service agreements (TSAs)with shippers for substantially all of its available firm transportation capacity. The TSAs were designedto provide toll revenues su�cient to recover prudently incurred costs of service, including operatingand maintenance, depreciation, an allowance for income taxes, costs of indebtedness and an allowedROE of 11.26% after-tax, based on a deemed 70/30 debt-to-equity ratio. Alliance Pipeline US had similarTSAs which allowed for the recovery of the cost of service, which included operating and maintenancecosts, the cost of financing, an allowance for income taxes, an annual allowance for depreciationand an allowed ROE of 10.88%. In addition, Alliance Pipeline US negotiated non-renewal charges thatwere an exit fee for shippers that did not elect to extend their transportation contracts. The initial termof the TSAs expired in December 2015, with the exception of a small proportion of shippers that electedto extend their contracts beyond 2015.


Gas Pipelines adjusted EBIT was $184 million for the year ended December 31, 2016 compared with$151 million for the year ended December 31, 2015. The increase in adjusted EBIT is primarily dueto lower operating costs and lower depreciation expense as a result of an extension to the useful lifeof the pipeline assets. Alliance Pipeline revenues were lower in 2016 resulting from the New ServicesFramework that commenced in the fourth quarter of 2015; however, earnings from the New ServicesFramework benefitted from strong demand for seasonal firm service. These positive e�ects werepartially o�set by the absence of the 2015 non-renewal fees for Alliance Pipeline US.

Gas Pipelines adjusted EBIT was $151 million for the year ended December 31, 2015 compared with$74 million for the year ended December 31, 2014. The increase in adjusted EBIT is primarily dueto incremental contributions from Alliance Pipeline US as a result of the 2014 Transaction as wellas strong demand in December 2015 for interruptible service under its New Services Framework.These increases were partially o�set by a shutdown of Alliance Pipeline Canada in August 2015.The Alliance Pipeline Canada portion was shut down on August 7, 2015 as hydrogen sulphide enteredinto its mainline pipeline system as a result of complications experienced by an upstream operator,which resulted in Alliance Pipeline issuing demand charge credits to its shippers.

Throughput Volume

2016 2015 2014

(millions of cubic feet per day)

Average throughput volume

AlliancePipelineCanada 1,532 1,488 1,556

AlliancePipelineUS 1,668 1,645 1,682

Alliance Pipeline throughput volume for the year ended December 31, 2016 increased compared with thecorresponding 2015 and 2014 periods. The increase was attributable to improved operational e�cienciesand stronger asset performance as discussed above. The decrease in throughput volume in 2015compared with 2014 was attributable to the shut-down of the Alliance Pipeline Canada on August 7, 2015,as noted above.


Business Risks

The risks identified below are specific to Gas Pipelines. General risks that a�ect EIPLP as a wholeare described under Risk Management and Financial Instruments – General Business Risks.

Asset Utilization

Currently, natural gas pipeline capacity out of the WCSB exceeds supply. To date, Alliance Pipeline hasbeen relatively una�ected by this excess capacity environment as it is situated in the growing Montney,Duvernay and Bakken areas and was successfully recontracted. Alliance Pipeline is also the onlyliquids-rich gas export pipeline within the WCSB. Further, Alliance Pipeline accesses large natural gasmarkets and, following extraction and fractionation at the Aux Sable NGL extraction and fractionationplant, delivers NGL to growing NGL markets. The New Services Framework also allows for the provisionof services beyond annual firm transport service, at market rates, further supporting asset utilization.

Competition

Alliance Pipeline faces competition for pipeline transportation services to the Chicago area from bothexisting pipelines and proposed pipeline projects from existing and new gas developments throughoutNorth America. Any new or upgraded pipelines could either allow shippers greater access to naturalgas markets or o�er natural gas transportation services that are more desirable than those providedby Alliance Pipeline because of location, facilities or other factors. In addition, any new, existing,or upgraded pipelines could charge tolls or rates or provide transportation services to locations thatresult in greater net profit for shippers, with the e�ect of reducing future supply for Alliance Pipeline.The ability of Alliance Pipeline to cost-e�ectively transport liquids-rich gas and its proximityto the liquids-rich Montney, Duvernay and Bakken plays serve to enhance its competitive position.

Economic Regulation

Alliance Pipeline is subject to regulation by the NEB in Canada and the FERC in the United States.Under the New Services Framework, e�ective December 1, 2015, Alliance Pipeline has contractedwith shippers under terms as approved by the NEB and the FERC. Firm service tolls are fixedfor the duration of the contracts’ terms.

Green PowerEarnings Before Interest and Income Taxes

2016 2015 2014


GreenPower 133 112 93

Adjusted earnings before interest and income taxes 133 112 93

Retrospective adjustment – 2015Transaction1 – 36 37

GreenPower – changes in unrealized derivative fair value gains 5 3 –

GreenPower – transformer outage costs, net of recoveries – 3 (3)

Earnings before interest and income taxes 138 154 127


Green Power includes 1,052 MW of net renewable and alternative energy sources. Of this amount,approximately 930 MW of net power generating capacity comes from nine wind farms located in theprovinces of Alberta, Ontario and Quebec. The vast majority of the power produced from these windfarms are sold under long-term PPAs. Also included in Green Power are three solar facilities located inOntario with 100 MW of net power generating capacity. EIPLP also has a 50% interest in NRGreen PowerLimited Partnership (NRGreen). NRGreen operates five waste heat recovery facilities with an aggregatecapacity of 34 MW (17 MW net), which are located at compressor stations along the Alliance Pipelinein Alberta and Saskatchewan. Power is generated by harnessing the waste heat produced by gas turbinesat Alliance Pipeline Canada’s compressor stations and converting the waste heat to electrical energy.



Green Power adjusted EBIT was $133 million for the year ended December 31, 2016 compared with$112 million for the year ended December 31, 2015. The increase was due to the inclusion of adjustedEBIT from the Lac Alfred, Massif du Sud, Blackspring Ridge and Saint Robert Bellarmin wind projectsfollowing the close of the 2015 Transaction, which was partially o�set by disruptions at certain easternCanadian wind farms in the first quarter and fourth quarter of 2016 due to weather conditions thatcaused icing of blades, as well as weaker wind resources experienced at certain facilities in Canadaduring the first half and fourth quarter of 2016.

Green Power adjusted EBIT was $112 million for the year ended December 31, 2015 compared with$93 million for the year ended December 31, 2014. In addition to the significant increase in adjustedEBIT as a result of the 2015 Transaction, adjusted EBIT increased slightly at Greenwich Wind andSarnia Solar facilities due to higher wind resources and stronger irradiance, respectively, o�setby a small decrease in adjusted EBIT from the Talbot Wind Facility due to lower wind resourcesand outages at facilities a�ecting NRGreen.

Production

2016 2015 2014

(thousands of megawatt hours produced)

WindFacilities1 2,539 1,645 1,100

Solar Facilities 156 160 150

WasteHeat Facilities 89 70 71

1 Wind facilities production is representative of EIPLP’s ownership period of the Lac Alfred, Massif du Sud, Blackspring Ridge and Saint Robert Bellarmin wind projects acquired in the2015 Transaction.

Business Risks

The risks identified below are specific to Green Power. General risks that a�ect EIPLP as a wholeare described under Risk Management and Financial Instruments – General Business Risks.

Asset Utilization

Earnings from EIPLP’s wind and solar assets are highly dependent on weather and atmosphericconditions as well as continued operational availability. While the expected energy yields for theGreen Power assets are predicted using long-term historical data, wind and solar resources are subjectto natural variation from year to year and from season to season. Any prolonged reduction in wind orsolar resources at any of EIPLP’s facilities could lead to decreased earnings and cash flows for EIPLP.Additionally, ine�ciencies or interruptions of Green Power facilities due to operational disturbancesor outages could also impact earnings. EIPLP mitigates the risk of operational availability by establishingOperations and Maintenance contracts with the original equipment manufacturers that includea negotiated operational performance asset and monitoring the operational performance and reliabilityof the assets on a 24-hour basis.

Power produced from Green Power assets is also often sold to a single counterparty under PPAsor other long-term pricing arrangements. In this respect, the performance of the Green Power assetsis dependent on each counterparty performing its contractual obligations under the PPA or pricingarrangement applicable to it.


Competition

Green Power operates in the Canadian power market, which is subject to competition and thesupply and demand balance for power in the provinces in which they operate. The renewable energymarket sector includes large utilities and small independent power producers, which are expectedto aggressively compete with the Manager for project development opportunities.

Regulatory

Specific to EIPLP’s wind farms located in the province of Ontario, renewable generators are classifiedas intermittent generators under the Independent Electricity System Operator (IESO) Market Rules.Amendments to the IESO Market Rules were passed on November 29, 2012, to allow for curtailmentof intermittent generators in times of surplus base-load generation. EIPLP and other renewable powergenerators reached an agreement with the IESO in February 2013 to amend certain existing PPAsto include both annual and contract term curtailment caps beyond which renewable power generatorswill be compensated for forgone production. Uncompensated curtailment impacts less than 1% of theoperating hours of the Ontario wind farms and is expected to remain consistent over the life of the PPAs.

Transmission Systems

The ability of Green Power assets to deliver power is impacted by the availability of, and access to,interconnection facilities and transmission systems. The inability to access or unavailability of suchsystems, the operational failure of such systems or the lack of adequate capacity on them couldhave an adverse impact on EIPLP’s ability to deliver power to counterparties or the requirementof counterparties to pay for energy delivery under various contracts, which in turn could havean adverse e�ect on EIPLP’s cash flows or financial condition.

Eliminations and OtherEarnings Before Interest and Income Taxes

2016 2015 2014


Dividend income froma�liate 40 14 –

Realized gains on translation ofUnitedStates dollar intercompany loan receivable 17 13 –

Other 1 3 –

Adjusted earnings before interest and income taxes 58 30 –

Retrospective adjustment – 2015Transaction1 – 9 92

Unrealized gains/(loss) on translation ofUnitedStates dollar intercompany loan receivable (43) 130 16

Employee severance cost allocation (21) (18) –

Earnings/(loss) before interest and income taxes (6) 151 108


Eliminations and Other primarily includes dividend income from EIPLP’s Series A Preferred Sharesinvestment in Enbridge Employee Services Canada Inc. acquired as part of the 2015 Transactionand realized foreign exchange gains and losses generated from repayments received from a subsidiaryon an intercompany loan receivable denominated in United States dollars.


Liquidity and Capital ResourcesEIPLP’s primary uses of cash are distributions to its partners, administrative and operational expenses,maintenance and growth capital spending, as well as interest and principal repayments on its long-termdebt. EIPLP generates cash from operations, commercial paper issuances and credit facility draws,through the periodic issuance of public term debt and issuance of units to its partners. Additionally,to ensure ongoing liquidity and to mitigate the risk of capital market disruption, EIPLP maintains a levelof committed bank credit facilities. In addition to ensuring adequate liquidity, EIPLP actively managesits bank funding sources to optimize pricing and other terms. All of the above noted debt, commercialpaper and credit facilities are held through EIPLP’s wholly-owned subsidiary EPI. Additional liquidity,if necessary, is expected to be available through intercompany transactions with Enbridge, the Fundor other related entities.

Bank Credit and Liquidity

Long-term debt primarily consists of committed credit facilities and medium-term notes (MTNs).As at December 31, 2016, EIPLP maintained $3,005 million (2015 – $3,005 million) of committed creditfacilities, of which $1,973 million (2015 – $1,659 million) were unutilized. EPI must adhere to covenantsunder its credit facility agreements and Trust Indenture. Under the terms of EPI’s Trust Indenture,in order to continue to issue long-term debt, EPI must maintain a ratio of Consolidated FundedObligations to Total Consolidated Capitalization of less than 75%. Total Consolidated Capitalizationconsists of shareholder’s equity, long-term debt and deferred income taxes. As at December 31, 2016,EPI was in compliance with all debt covenants.

During the third quarter of 2016, EPI completed the issuance of unsecured MTNs for gross proceedsof $800 million. The MTNs issuance consisted of $400 million with a 10-year maturity and $400 millionwith a 30-year maturity. The corresponding interest rates were 3.0% and 4.1%, respectively.

EIPLP’s net available liquidity of $2,095 million, as at December 31, 2016, was inclusive of $293 millionof unrestricted cash and cash equivalents and net of bank indebtedness of $171 million. The net availableliquidity, together with cash from operations, intercompany funding and proceeds of debt capital markettransactions, is expected to be su�cient to finance capital expenditures requirements, fund liabilitiesas they become due, fund debt retirements and pay distributions.

Excluding current maturities of long-term debt, as at December 31, 2016 and 2015, EIPLP had negativeworking capital positions of $1,270 million and $1,120 million, respectively. EIPLP maintains significantliquidity in the form of committed credit facilities and other sources as previously discussed, whichenable the funding of liabilities as they become due. In addition, it is anticipated that any currentmaturities of long-term debt will be refinanced upon maturity.

December 31, 2016 2015


Cash and cash equivalents 293 129

Accounts receivable andother1 592 662

Loans to a�liates 3 3

Bank indebtedness (171) (33)

Accounts payable andother2 (1,311) (1,598)

Distributions payable to a�liates (179) (143)

Interest payable (56) (45)

Loans froma�liates (441) (95)

Working capital (1,270) (1,120)

1 Includes Accounts receivable from a�liates.2 Includes Accounts payable to a�liates.



2016 2015 2014


Operating activities 1,906 1,949 1,700

Investing activities (1,316) (5,305) (3,472)

Financing activities (426) 3,321 1,800

E�ect of translation of foreign denominated cash and cash equivalents – 2 –

Increase/(decrease) in cash andcash equivalents 164 (33) 28

Significant sources and uses of cash for the years ended December 31, 2016 and December 31, 2015are summarized below:

Operating Activities

2016

• The cash changes delivered by operations in 2016 are a reflection of stronger operatingperformance from EIPLP’s Liquids Pipelines segment as well as greater distributions from AlliancePipeline. Partially o�setting the increase in cash were higher interest and taxes. For further discussion,see Performance Overview – Adjusted EBIT and Performance Overview – Adjusted Earnings Attributableto General and Limited Partners.

• EIPLP’s operating assets and liabilities fluctuate in the normal course due to various factors includingthe timing of tax payments, general variations in activity levels within EIPLP’s businesses, as wellas timing of cash receipts and payments.

2015

• The cash changes delivered by operations in 2015 compared with 2014 is a reflection of strongoperating performance from the Canadian Mainline due to higher throughput, partly attributed to theexpansion of the Canadian Mainline completed in July 2015. For further discussion, see PerformanceOverview – Adjusted EBIT and Performance Overview – Adjusted Earnings Attributable to Generaland Limited Partners.

Investing Activities

EIPLP continues to execute its growth capital program, described in Growth Projects. The timing of projectapproval, construction and in-service dates will impact the timing of cash requirements.

A summary of additions to property, plant and equipment for the years ended December 31, 2016, 2015and 2014 is set out below:



LiquidsPipelines 2,349 3,064 4,152

GreenPower 4 4 204

Total capital expenditures 2,353 3,068 4,356

2016

• For the years ended December 31, 2016 and 2015, additions to property, plant & equipment were$2,353 million and $3,068 million, respectively. This decrease in cash expenditures were attributableto the successful completion of growth projects in 2015, including the Edmonton to Hardisty Expansionand phases of the Eastern Access Program, which required significant capital spending during 2015.

• Included within investing activities in 2016 were proceeds of $1.08 billion from the disposition of theSouth Prairie Region assets completed in December 2016. The proceeds will be used to fund EIPLP’ssecured growth program.


2015

• Additions to property, plant & equipment were $3,068 million and $4,356 million for the yearsended December 31, 2015 and 2014, respectively. Similarly, the year-over-year decrease in cashexpenditures reflected the successful completion of growth projects in 2015, as discussed above.

• Included within investing activities in 2015 was $2,712 million paid to acquire the Purchased Entitiesas part of the 2015 Transaction.

Financing Activities

2016

• EIPLP’s long-term debt increased in 2016 compared with 2015 due to EPI’s issuance of two MTNsduring the third quarter of 2016, as previously discussed, which facilitated a reduction in commercialpaper issuances in 2016.

• On April 20, 2016, EIPLP issued 25.4 million Class A units to ECT for gross proceeds of $718 millionfollowing ENF’s common share issuance.

• Within financing activities was an increase in distributions to the partners of EIPLP, being ECT andEnbridge, reflecting the increased asset base in EIPLP following the 2015 Transaction. In addition,EIPLP also paid a one-time Class A unit distribution to ECT of $264 million following the close ofthe disposition of the South Prairie Region assets in December 2016.

2015

• EIPLP’s long-term debt increased in 2015 compared with 2014 due to EPI’s issuance of two MTNsfor $600 million and $400 million as well as an increase in credit facility draws.

• In November 2015, EIPLP issued 27 million Class A units to ECT for gross proceeds of $874 million.In September 2015, 85 million Class A units were issued to ECT for gross proceeds of $3,000million as part of the 2015 Transaction.

• In November 2014, 58 million Class A units were issued to ECT for gross proceeds of $1,760 millionas part of the 2014 Transaction.

Distributions

The following tables summarize the cash and non-cash distributions declared by EIPLP forthe years ended December 31, 2016, 2015 and 2014, and the quarters therein, as applicable.

Class A Units

2016 2015 2014

DistributionRate1 Total



(millions of Canadian dollars, except distribution rate)

Threemonths endedMarch31, 0.5585 199 0.4938 121 0.4299 81

Threemonths ended June30, 0.5667 217 0.4938 121 0.4299 81

Threemonths endedSeptember 30, 0.5667 217 0.4919 135 0.4299 81

Threemonths endedDecember 31, 0.5667 217 0.4874 169 0.4724 106

Year endedDecember 31, 2.2586 850 1.9669 546 1.7621 349

1 Class A unit distributions are declared monthly and paid in cash in the following month.

In December 2016, EIPLP also paid a one-time Class A unit distribution to ECT of $0.6933 per unitor $264 million following the close of the disposition of the South Prairie Region assets.


Class C Units

2016 2015




Threemonths endedMarch31, 0.5376 237 – –

Threemonths ended June30, 0.5376 239 – –

Threemonths endedSeptember 30, 0.5376 238 0.1574 70

Threemonths endedDecember 31, 0.5376 238 0.4723 209

Year endedDecember 31, 2.1504 952 0.6297 279

1 Class C unit distributions are declared monthly and paid in cash in the following month. Class C units were first issued on September 1, 2015 pursuant to the 2015 Transaction.

Class D Units

2016 2015




Threemonths endedMarch31, 0.5376 1 – –

Threemonths ended June30, 0.5376 3 – –

Threemonths endedSeptember 30, 0.5376 4 – –

Threemonths endedDecember 31, 0.5376 5 0.4723 1

Year endedDecember 31, 2.1504 13 0.4723 1

1 Class D unit distributions are declared monthly and paid-in-kind with the issuance of additional Class D units in the following month. Class D units were first issued in October 2015pursuant to the first payment of TPDR distributions of the SIR.

Special Interest Rights – TPDR

2016 2015

Total1 Total1


Threemonths endedMarch31, 64 –

Threemonths ended June30, 66 –

Threemonths endedSeptember 30, 66 14

Threemonths endedDecember 31, 66 44


1 TPDR distributions are declared monthly and paid-in-kind to holders of the SIR with the issuance of additional Class D units in the following month. SIR were first issuedon September 1, 2015 pursuant to the 2015 Transaction.

Special Interest Rights – IDR

2016

Total1


Threemonths endedMarch31, 11

Threemonths ended June30, 12

Threemonths endedSeptember 30, 12

Threemonths endedDecember 31, 12


1 IDR distributions are declared monthly and paid in cash to holders of the SIR in the following month. SIR were first issued on September 1, 2015 pursuant to the 2015 Transaction.


Contractual Obligations

Payments due under contractual obligations over the next five years and thereafter are as follows:

TotalLess than

1 year 1 – 3 years 3 – 5 years After 5 years


Long-termdebt1 5,048 16 636 381 4,015

Loans froma�liates 6,242 441 – 1,200 4,601

Capital andoperating leases2 114 10 19 15 70

Long-termcontracts 869 626 162 26 55

Total contractual obligations 12,273 1,093 817 1,622 8,741

1 Represents debenture and term note maturities and excludes interest obligations. Changes to the planned funding requirements are dependent on the terms of anydebt refinancing agreements.

2 Includes land leases.

Capital Expenditure Commitments

Included within Long-term contracts in the table above are contracts that EIPLP has signed primarilyfor the purchase of services, pipe and other materials totalling $713 million, which are expectedto be paid over the next five years.

Tax Matters

EIPLP has no unrecognized tax benefits related to uncertain tax positions as at December 31, 2016and 2015 and no accrued interest or penalties thereon.

Litigation

EIPLP and its subsidiaries are subject to various other legal and regulatory actions and proceedingswhich arise in the normal course of business, including interventions in regulatory proceedings andchallenges to regulatory approvals and permits by special interest groups. While the final outcomeof such actions and proceedings cannot be predicted with certainty, the Manager believes that theresolution of such actions and proceedings will not have a material impact on EIPLP’s consolidatedfinancial position or results of operations.

Quarterly Financial Information1,2



Revenues 1,540 742 853 787 3,922

Earnings attributable to general and limited partners 705 172 221 890 1,988



Revenues (60) 1,007 180 747 1,874

Earnings/(loss) attributable to general and limited partners (301) 469 (274) 228 122

1 Quarterly financial information has been retrospectively adjusted to reflect the 2015 Transaction prior to September 1, 2015 as prescribed by U.S. GAAP for commoncontrol transactions.

2 Revenues and Earnings/(loss) attributable to general and limited partners are impacted by changes in unrealized derivative fair value gains and losses on derivatives.

Several factors impact comparability of EIPLP’s financial results on a quarterly basis, including, but notlimited to, fluctuations in market prices such as foreign exchange rates and commodity prices, disposalsof investments or assets and the timing of in-service dates of new projects.

EIPLP actively manages its exposure to market risks including, but not limited to, commodity prices, interestrates and foreign exchange rates. To the extent derivative instruments used to manage these risks arenon-qualifying for the purposes of applying hedge accounting, changes in unrealized derivative fair valuegains and losses on these instruments will impact earnings.

Finally, EIPLP undertook a substantial capital program in recent years and the timing of construction andcompletion of growth projects may impact the comparability of quarterly results. EIPLP’s capital expansioninitiatives, including construction commencement and in-service dates, are described in Growth Projects.


Significant items that have impacted quarterly financial informationare as follows:

• Included in the fourth quarter of 2016 was a gain of $850 millionrelated to the disposition of the South Prairie Region assetswithin the Liquids Pipelines segment.

• Included in the second and third quarters of 2016 were after-tax costs of $15 million and $13 million, respectively, incurredin relation to the restart of certain of EIPLP’s pipelinesand facilities following the northeastern Alberta wildfires.

• EIPLP issued 25.4 million Class A units to ECT in April 2016.The proceeds will be used to fund EIPLP’s securedgrowth program.

• Beginning in the third quarter of 2015, EIPLP began makingTPDR distributions to the holders of its SIR. EIPLP also beganmaking IDR distributions to the holders of its SIR during the firstquarter of 2016.

• EIPLP’s Green Power segment is subject to seasonal variations.This is driven by generally stronger wind resources in the firstand fourth quarters and stronger solar resources in the secondand third quarters. Although these trends are o�setting, revenuesand earnings are generally expected to be lowest in the thirdquarter, attributable to seasonally weaker wind resources.

• As part of the 2015 Transaction, the commercially securedgrowth programs embedded within EPI and Enbridge Pipelines(Athabasca) Inc. (EPAI) were transferred to EIPLP. Prior tothe close of the 2015 Transaction, both EPI and EPAI undertooksubstantial capital growth projects over recent years. The timingof construction and completion of growth projects may impactthe comparability of EIPLP’s quarterly results. EIPLP’s capitalexpansion initiatives, including construction commencementand in-service dates, are described in Growth Projects.

Related Party TransactionsAll related party transactions are entered into in the normal course ofbusiness and, unless otherwise noted, are measured at the exchangeamount, which is the amount of consideration established and agreedto by the related parties. A�liates refer to Enbridge and companiesthat are either directly or indirectly owned by Enbridge.

The acquisition of the Purchased Entities in the 2015 Transaction andequity investment in Alliance Pipeline US in the 2014 Transaction wereaccounted for as transactions among entities under common control.

General Partner

Enbridge Income Partners GP Inc. (EIPGP), a subsidiary of Enbridge,is the general partner of EIPLP and owns 0.01% of the Class A unitsof EIPLP. As at December 31, 2016, Enbridge holds a 51% directinterest in EIPGP. Per EIPLP’s partnership agreement, EIPGPhas the right to manage, control and operate the businessesof EIPLP. EIPGP delegates the execution of certain of its powersto the Manager, a wholly-owned subsidiary of Enbridge.

Intercorporate Services

On August 2, 2015 all Canadian employees of EPI and EPAI weretransferred to an a�liated company which assumed all employmentrelated obligations, commitments and liabilities. The related netpension and other post-employment benefit liabilities, as wellas the related unamortized losses recorded in accumulated othercomprehensive income (AOCI), were not included in the retrospectiveconsolidated financial statements as EIPLP has elected to recognizerequired contributions for the period as net pension costs withoutreflecting related plan benefit obligations and plan assets.

Pension related costs of $45 million for the year endedDecember 31, 2015 (2014 – $48 million) were recorded inOperating and administrative expense on the ConsolidatedStatements of Earnings.

As at December 31, 2016, EIPLP and its subsidiaries do not haveany employees and receives services from a�liates for managingand operating the business. These services, which are charged atcost in accordance with service agreements or which reflect normalcommercial trade terms, totalled $445 million for the year endedDecember 31, 2016 (2015 – $234 million; 2014 – $90 million).

EIPLP provides certain operational services to a�liates.These services, which are charged at cost in accordance withservice agreements or which reflect normal commercial tradeterms, totalled $15 million for the year ended December 31, 2016(2015 – $166 million; 2014 – $214 million).

Liquids Pipelines

EIPLP has contracts with shippers who are also a�liates of EIPLPthrough common ownership interests of Enbridge. Revenues froma�liates, which reflect normal commercial trade terms, totalled$52 million for the year ended December 31, 2016 (2015 – $78 million;2014 – $51 million).

Gas Pipelines

Alliance Pipeline has contracts with shippers that are also a�liatesof EIPLP through common ownership interests of Enbridge. EIPLP’sshare of Alliance Pipeline’s revenues from a�liates for the yearended December 31, 2016 was $134 million (2015 – $59 million;2014 – $50 million).

Long-Term Receivable from A�liate

Long-term receivable from a�liate includes the carrying valueof Class A units of Southern Lights Holdings, L.L.C., which is anindirect wholly-owned subsidiary of Enbridge. As at December 31, 2016,$782 million (2015 – $826 million) is included in Long-term receivablefrom a�liate and $19 million (2015 – $18 million) is includedin Accounts receivable from a�liates. Interest income of $62 millionfor the year ended December 31, 2016 (2015 – $61 million;2014 – $5 million), has been recorded within Other income –a�liates on the Consolidated Statements of Earnings.


Investment in A�liated Company

As at December 31, 2016, EIPLP had an investment of $514 million (2015 – $514 million) in 500,000non-voting, redeemable Series A Preferred Shares of EESCI. These Preferred Shares entitle EIPLPto receive annual dividends through 2021. EESCI has the option to redeem the outstanding PreferredShares at any time. EIPLP is also entitled to require redemption of these Preferred Shares at any time.Dividend income of $40 million was recognized in Other income – a�liates for the year endedDecember 31, 2016 (2015 – $14 million; 2014 – nil).

During the year ended December 31, 2015, a subsidiary of Enbridge exercised its option to redeemthe $160 million in 160,000 non-voting, redeemable preference shares that were held as an investmentby EPAI, a subsidiary of EIPLP. The investment was acquired in 2015 and entitled EPAI to receivea minimum cumulative quarterly dividend equal to 106.25% of the cost of funds incurred by EPAIto finance its acquisition of these preference shares. Dividend income of nil was recognized inOther income – a�liates for the year ended December 31, 2016 (2015 – $4 million; 2014 – $12 million).

During the year ended December 31, 2014, Enbridge Energy Distribution Inc. (EEDI) exercised its optionto redeem the $2,690 million in 2.69 million non-voting, redeemable, retractable preference sharesof EEDI that were held as an investment by EPI, a subsidiary of EIPLP. The investment was acquiredin 2013 and entitled EPI to receive a cumulative quarterly dividend equal to 106.25% of the cost of fundsincurred by EPI to finance its acquisition of these preference shares.

Intercorporate Loans and Balances

Loan to A�liate

The following loan to a�liate is evidenced by a formal loan agreement:

2016 2015

December 31, Maturity

WeightedAverage

Interest Rate AmountWeight Average

Interest Rate Amount


A�liate Current 6.0% 3 6.0% 3

Current portion of loan to a�liate (3) (3)

– –

Loans from A�liates

The following loans from a�liates are evidenced by formal loan agreements:

2016 2015


WeightedAverage


WeightedAverage


(millions ofCanadian dollars)

Enbridge 2020 – 2064 4.5% 4,191 4.6% 4,191

Enbridge 2025 4.0% 124 4.0% 124

Enbridge Current 0.0% 134 – –


A�liate Current 2.0% 229 – –

A�liate 2020 7.1% 100 7.1% 100

A�liate 2045 4.0% 734 4.0% 734

A�liate 2045 4.0% 652 4.0% 652

A�liate – – – 1.9% 47

6,242 5,896

Current portion of loans froma�liates (441) (95)

5,801 5,801

Loans from a�liates’ maturities are $441 million for the year ended December 31, 2017; nil forthe years ending December 31, 2018 and 2019, respectively; and $600 million for each of the yearsending December 31, 2020 and December 31, 2021. These loans are subordinate to senior, unsecureddebt. The a�liate loan interest obligations are $255 million, $254 million, $254 million, $239 millionand $210 million for each of the years ending December 31, 2017 through 2021.


As at December 31, 2016, EIPLP had a net hedge payable balanceof $2,023 million (2015 – $2,501 million net payable) to a�liatesin respect of derivative instruments that the a�liates enteredinto on EIPLP’s behalf. These amounts are recorded in Accountsreceivable from a�liates, Deferred amounts and other assets,Accounts payable to a�liates and Other long-term liabilitieson the Consolidated Statements of Financial Position.

Risk Management andFinancial InstrumentsMaintaining a reliable and low risk business model is central toEIPLP’s objective of paying out a predictable cash flow to partners.The Fund Group actively manages both financial and non-financialrisks that EIPLP is exposed to. The Fund Group performs anannual corporate risk assessment to identify all potential risks.Risks are ranked based on severity and likelihood both beforeand after mitigating actions. In addition, the Fund Group hasadopted a Cash Flow at Risk (CFAR) policy to manage exposure tomovements in interest rates, foreign exchange rates and commodityprices. CFAR is a statistically derived measurement that quantifiesthe maximum adverse impact on cash flows over a specified periodof time within a pre-defined level of statistical confidence. The FundGroup’s CFAR limit has been set at 2.5% of forward annual ACFFOof the Fund Group.

Market Price Risk

EIPLP’s earnings, cash flows and OCI are subject to movementsin interest rates, foreign exchange rates and commodity prices(collectively, market price risk). Formal risk management policies,processes and systems have been designed to mitigate these risks.

The following summarizes the types of market price risks to whichEIPLP is exposed and the risk management instruments usedto mitigate them. EIPLP uses a combination of qualifying andnon-qualifying derivative instruments to manage the risks noted below.

Interest Rate Risk

EIPLP’s earnings, cash flows and OCI are exposed to short terminterest rate variability due to the regular repricing of its variable ratedebt, primarily commercial paper. Pay fixed-receive floating interestrate swaps are used to hedge against the e�ect of future interestrate movements. EIPLP has implemented a program to significantlymitigate the volatility of short-term interest rates on interest expensewith the execution of floating to fixed rate interest rate swaps withan average swap rate of 1.9%.

EIPLP’s earnings, cash flows and OCI are also exposed to variabilityin longer term interest rates ahead of anticipated fixed rate debtissuances. Forward starting interest rate swaps are used to hedgeagainst the e�ect of future interest rate movements. EIPLP hasimplemented a program to significantly mitigate its exposureto long-term interest rate variability on select forecast term debtissuances with the execution of floating to fixed rate interest rateswaps with an average swap rate of 3.1%.

EIPLP’s portfolio mix of fixed and variable rate debt instrumentsis managed at the Fund Group level.

Foreign Exchange Risk

EIPLP generates certain revenues, incurs expenses and holdsinvestments and subsidiaries that are denominated in currenciesother than Canadian dollars. As a result, EIPLP’s earnings, cashflows and OCI are exposed to fluctuations resulting from foreignexchange rate variability.

EIPLP has implemented a policy whereby, at a minimum, it hedgesa level of foreign currency denominated cash flow exposuresover a five year forecast horizon. A combination of qualifyingand non-qualifying derivative instruments is used to hedgeanticipated foreign currency denominated revenues and expenses,and to manage variability in cash flows.

Commodity Price Risk

EIPLP’s earnings, cash flows and OCI are exposed to changesin commodity prices as a result of its ownership interest in certainassets and investments. These commodities primarily consistof crude oil and power. EIPLP employs financial derivativeinstruments to fix a portion of the variable price exposures thatarise from physical transactions involving these commodities.EIPLP may use a combination of qualifying and non-qualifyingderivative instruments to manage commodity price risk.


The E�ect of Derivative Instruments on the Statements of Earnings and Comprehensive Income

The following table presents the e�ect of cash flow hedges on EIPLP’s consolidated earningsand consolidated comprehensive income, before the e�ect of income taxes.




Cash flowhedges


Interest rate contracts 17 (38) (174)

Commodity contracts 15 6 11

32 (30) (162)


Foreign exchange contracts1 (1) – (1)


Commodity contracts3 (11) (7) (2)

4 2 –

Amount of (gains)/loss reclassified fromAOCI to earnings (ine�ective portion and amount excluded from e�ectiveness testing)

Interest rate contracts2 20 – (1)

20 – (1)

Amount of gains/(loss) fromnon-qualifying derivatives included in earnings

Foreign exchange contracts1 534 (1,487) (522)

Commodity contracts3 (22) (8) 3

512 (1,495) (519)

1 Reported within Transportation and other services revenues and Other income/(expense) in the Consolidated Statements of Earnings.2 Reported within Interest (income)/expense in the Consolidated Statements of Earnings.3 Reported within Transportation and other services revenues, Electricity sales revenues, Operating and administrative expense and Other income/(expense) in the Consolidated

Statements of Earnings.

Liquidity Risk

Liquidity risk is the risk EIPLP will not be able to meet its financial obligations, including commitmentsand guarantees, as they become due. In order to manage this risk, EIPLP forecasts cash requirementsover the near and long term to determine whether su�cient funds will be available when required.EIPLP generates cash from operations, commercial paper issuances and credit facility draws, throughthe periodic issuance of public term debt and issuance of units to its partners. Additionally, to ensureongoing liquidity and to mitigate the risk of market disruption, EIPLP maintains a level of committed bankcredit facilities. EIPLP actively manages its bank funding sources to optimize pricing and other terms.Additional liquidity, if necessary, is expected to be available through intercompany transactions withEnbridge or other related entities. EIPLP is in compliance with all terms and conditions of its committedcredit facilities as at December 31, 2016. As a result, all credit facilities are available to EIPLP andthe banks are obliged to fund and have been funding EIPLP under the terms of the credit facilities.

Credit Risk

Entering into derivative financial instruments may result in exposure to credit risk. Credit risk arises fromthe possibility that a counterparty will default on its contractual obligations. In order to mitigate this risk,EIPLP enters into risk management transactions primarily with institutions that possess investment gradecredit ratings. Credit risk relating to derivative counterparties is mitigated by credit exposure limits andcontractual requirements, frequent assessment of counterparty credit ratings and netting arrangements.

EIPLP generally has a policy of entering into individual International Swaps and Derivatives Association, Inc.agreements, or other similar derivative agreements, with the majority of its derivative counterparties.These agreements provide for the net settlement of derivative instruments outstanding with specificcounterparties in the event of bankruptcy or other significant credit event, and would reduce EIPLP’scredit risk exposure on derivative asset positions outstanding with the counterparties in theseparticular circumstances.


Credit risk also arises from trade and other long-term receivables,and is mitigated through credit exposure limits, contractualrequirements, assessment of credit ratings and netting arrangements.Generally, EIPLP classifies and provides for receivables older than30 days as past due. The maximum exposure to credit risk relatedto non-derivative financial assets is their carrying value.


EIPLP’s financial assets and liabilities measured at fair value ona recurring basis include derivative instruments. EIPLP also disclosesthe fair value of other financial instruments not measured at fairvalue. The fair value of financial instruments reflects EIPLP’s bestestimates of market value based on generally accepted valuationtechniques or models and are supported by observable marketprices and rates. When such values are not available, EIPLP usesdiscounted cash flow analysis from applicable yield curves basedon observable market inputs to estimate fair value.

General Business Risks

Strategic and Commercial Risks

Economic Regulation, Permits and Approvals

Many of EIPLP’s operations are regulated. The nature and degreeof regulation and legislation a�ecting energy companies in Canadaand the United States have changed significantly in past years andthere is no assurance that further substantial changes will not occur.

EIPLP also faces economic regulation, permits and approvalsrisk, which broadly defined, is the risk that regulators or othergovernment entities change or reject proposed or existingcommercial arrangements including permits and regulatoryapprovals for new projects, such as the Canadian L3R Program.The changing or rejecting of commercial arrangements, includingdecisions by regulators on the applicable tari� structure or changesin interpretations of existing regulations by courts or regulators,could have an adverse e�ect on EIPLP’s revenues, earnings anddistributable cash flow. Increasing regulatory scrutiny and resultingdelays in regulatory permits and approvals with respect to projectscould result in cost escalations, construction delays and in-servicedelays which also negatively impact EIPLP’s operations.

The FERC continues to intensify its oversight of financial reporting,risk standards and a�liate rules, and in 2014, the Pipeline andHazardous Materials Safety Administration issued new pipelinestandards and regulations on managing gas pipeline integrity.EIPLP continues ongoing dialogue with regulatory agencies andparticipates in industry groups to ensure it is informed of emergingissues in a timely manner.

The Manager believes that economic regulatory risk is reducedthrough the negotiation of long-term agreements with shippersthat govern the majority of its operations. The Manager alsoinvolves its legal and regulatory teams in the review of new projectsto ensure compliance with applicable regulations, as well as in theestablishment of tari�s and tolls for these assets. The Managerretains dedicated professional sta� and maintains strongrelationships with customers, intervenors and regulators to helpminimize economic regulation risk. However, despite the e�orts

of the Manager to mitigate economic regulation risk, there remainsa risk that a regulator could overturn long-term agreementsbetween EIPLP and shippers or deny the approval and permitsfor new projects.

EIPLP will be required to comply with numerous federal, provincialand local laws and regulations and to maintain and comply withnumerous regulatory licenses, permits and governmental approvalsrequired for the maintenance and operation of its assets. Many ofthe regulatory permits that have been issued in respect of EIPLP’sassets contain terms, conditions and restrictions, or may have limitedterms. A failure to satisfy the terms and conditions or comply withthe restrictions imposed under regulatory permits or the restrictionsimposed by any statutory or regulatory requirements, may resultin regulatory enforcement action, which could adversely a�ectcontinued operations, or result in fines, penalties or additionalcosts, including requirements to suspend or cease operations.

Project Execution

As EIPLP continues to execute on its growth projects, it continuesto focus on completing projects safely, on-time and on-budget.The ability to successfully execute the development of its organicgrowth projects may be influenced by capital constraints, third-partyopposition, changes in shipper support over time, delays in orchanges to government and regulatory approvals, cost escalations,construction delays, inadequate resources, in-service delays andincreasing complexity of projects (collectively, Execution Risk).

Early stage project risks include right-of-way procurement, specialinterest group opposition, Crown consultation and environmentaland regulatory permitting. Cost escalations or missed in-servicedates on future projects may impact future earnings and cashflows and may hinder the Manager’s ability to secure future projects.Construction delays due to regulatory delays, third-party opposition,contractor or supplier non-performance and weather conditionsmay impact project development.

Enbridge, through its enterprise-wide Major Projects Group, strivesto be an industry leader in project execution. The Major ProjectsGroup seeks to mitigate project execution risk through a centralizedstructure that has a clearly defined governance and process forall major projects, with dedicated resources organized to leadand execute each major project.

Capital constraints and cost escalation risks are mitigated throughstructuring of commercial agreements, typically where shippersretain complete or a share of capital cost excess. Detailed costtracking and centralized purchasing is used on all major projectsto facilitate optimum pricing and service terms. Strategicrelationships have been developed with suppliers and contractorsand those selected are chosen based on the Manager’s strictadherence to safety including robust safety standards embeddedin contracts with suppliers. Major Projects has assessed workvolumes for the next several years across its projects to optimizethe expected costs, supply of services, materials and labour toexecute the projects. Underpinning this approach is Major Project’sProject Lifecycle Gating Control tool which helps to ensure thatschedule, cost, safety and quality objectives are on track andmet for each stage of a project’s development and construction.


Consultations with regulators are held in-advance of projectconstruction to enhance understanding of project rationale andensure applications are compliant and robust, while at all timesmaintaining a strong focus on integrity and public safety. Enbridgealso actively involves its legal and regulatory teams to work closelywith the Major Projects Group to engage in open dialogue withgovernment agencies, regulators, land owners, Indigenous peoplesand special interest groups to identify and develop appropriateresponses to their concerns regarding EIPLP’s projects.

Public Opinion

Public opinion or reputation risk is the risk of negative impacts onEIPLP’s business, operations or financial condition resulting fromchanges in Enbridge’s enterprise-wide reputation with stakeholders,special interest groups, political leadership, the media or otherentities. Public opinion may be influenced by certain media andspecial interest groups’ negative portrayal of the industry in whichEIPLP operates as well as their opposition to development projects,such as the Bakken Pipeline System. Potential impacts of a negativepublic opinion may include loss of business, delays in projectexecution, legal action, increased regulatory oversight or delaysin regulatory approval and higher costs.

Reputation risk often arises as a consequence of some other riskevent, such as in connection with operational, regulatory or legalrisks. Therefore, reputation risk cannot be managed in isolation fromother risks. Enbridge manages enterprise-wide reputation risk by:

• having health, safety and environment management systemsin place, as well as policies, programs and practices forconducting safe and environmentally sound operationswith an emphasis on the prevention of any incidents;

• having formal risk management policies, procedures andsystems in place to identify, assess and mitigate risks;

• operating to the highest ethical standards, with integrity,honesty and transparency, and maintaining positiverelationships with customers, investors, employees,partners, regulators and other stakeholders;

• building awareness and understanding of the role energyand Enbridge play in people’s lives in order to promote betterunderstanding of Enbridge and its businesses;

• having strong corporate governance practices, includinga Statement on Business Conduct, which requires all employeesto certify their compliance with Enbridge policy on an annualbasis, and whistleblower procedures, which allow employeesto report suspected ethical concerns on a confidential andanonymous basis; and

• pursuing socially responsible operations as a longer-termcorporate strategy.

Enbridge’s actions noted above are the key mitigation actions againstnegative public opinion; however, the public opinion risk cannot bemitigated solely by Enbridge’s individual actions. Enbridge activelyworks with other stakeholders in the industry to collaborate and work

closely with government and Indigenous Peoples communitiesto enhance the public opinion of Enbridge, as well as the industryin which it and its subsidiaries operate. Unless otherwise specificallystated, none of the content of the policies or initiatives describedabove are incorporated by reference herein.

Transformation Projects

Transformation project risk is the risk that a large changemanagement initiative carried out by Enbridge and its subsidiarieswill fail to fully deliver anticipated results because of a failure to fullyaddress risks associated with change delivery and implementation.This could result in negative financial, operational and reputationalimpacts to Enbridge and its subsidiaries. Such large scale changemanagement initiatives include Enbridge’s enterprise-wide BuildingOur Energy Future initiative launched in 2016. The Building OurEnergy Future initiative is a transformation program that is intendedto drive out focused improvements across the enterprise to ensurean e�ective and e�cient organization that will better support theexecution of key strategies. To mitigate its transformation projectsrisk associated with the Building Our Energy Future initiative,Enbridge established the enterprise-wide Results DeliveryO�ce to manage the integrated plan and roadmap of initiatives,execute the transformation process, provide coaching andsupport to impacted teams in the areas of results delivery,tracking progress and identification of new risks and establishmentof appropriate mitigation steps to address those risks.

Environmental and Safety Risks

Public, Worker and Contractor Safety

Several of EIPLP’s pipeline systems and related assets are operatedin close proximity to populated areas and a major incident couldresult in injury to members of the public. A public safety incidentcould result in reputational damage to Enbridge and its subsidiaries,material repair costs or increased costs of operating and insuringits assets. In addition, given the natural hazards inherent inthe operations of Enbridge and its subsidiaries, the workersand contractors are subject to personal safety risks.

Safety and operational reliability are the most important priorities.Mitigation e�orts to reduce the likelihood and severity of a publicsafety incident are executed primarily through Enbridge’s ORM Planand emergency response preparedness. Enbridge also activelyengages stakeholders through public safety awareness activitiesto ensure the public is aware of potential hazards and understandsthe appropriate actions to take in the event of an emergency.Enbridge also actively engages first responders through educationprograms that endeavour to equip first responders with the skillsand tools to safely and e�ectively respond to a potential incident.

Finally, Enbridge and its subsidiaries believe in a safety culture wheresafety incidents are not tolerated by employees and contractorsand has established a target of zero incidents. For employees, safetyobjectives have been incorporated across all subsidiaries of Enbridgeand are included as part of an employee’s compensation measures.Contractors are chosen following a rigorous selection processthat includes a strict adherence to Enbridge’s safety culture.


Environmental Incident

EIPLP is subject to the risk of incurring substantial costs andliabilities under environmental, health and safety laws applicableto its assets. Environmental and health and safety legislationimposes restrictions, liabilities and obligations in connection with thegeneration, handling, storage, transportation, treatment and disposalof hazardous substances and waste and in connection with noise,spills, releases and emissions of substances into the environment.Environmental laws also mandate that pipelines, tanks, turbines,installations, facilities and other properties associated with its assetsbe operated, maintained, abandoned and reclaimed in accordancewith applicable regulations and guidelines. Failure to comply withenvironmental, health and safety laws may result in the impositionof administrative and criminal penalties, civil liability, liens andthe imposition of remedial obligations such as cleanup and siterestoration requirements, the revocation or suspension of operatingpermits and the issuance of orders to limit or cease operations.

An environmental incident could have lasting reputationalimpacts to EIPLP and could impact its ability to work with variousstakeholders. In addition to the cost of remediation activities(to the extent not covered by insurance), environmental incidentsmay lead to an increased cost of operating and insuring EIPLP’sassets, thereby negatively impacting earnings and distributablecash flows. EIPLP mitigates risk of environmental incidents throughits inclusion in Enbridge’s ORM Plan, which broadly aims to positionEnbridge and its subsidiaries as the industry leader for systemintegrity, environmental and safety programs. Mitigation e�ortscontinue to focus on reducing the likelihood of an environmentalincident. Under the umbrella of the ORM Plan, EIPLP hascontinued its maintenance, excavation and repair programwhich is supported by operating and capital budgets for pipelineintegrity. The Canadian L3R Program is a further commitmentby EIPLP to its key strategic priority of safety and operationalreliability. Once it is completed, the Canadian L3R Program willprovide a major enhancement to EIPLP’s mainline system byreplacing most segments of the Line 3 pipeline with the latesthigh-strength steel and coating.

Although the Manager believes its integrated management system,plans and processes mitigate the risk of environmental incidents,there remains a chance that an environmental incident could occur.The ORM Plan also seeks to mitigate the severity of a potentialenvironmental incident through continued process improvements,regular inspections and monitoring of facilities, as well asenhancements in leak detection processes and alarm analysisprocedures. The Manager has also invested significant resourcesto enhance its emergency response plans, operator trainingand landowner education programs to address any potentialenvironmental incident.

EIPLP is included in Enbridge’s comprehensive insurance coverage,which covers Enbridge subsidiaries and a�liates and is renewedannually. The insurance program includes coverage for commercialliability that is considered customary for its industry and includescoverage for environmental incidents excluding costs for finesand penalties. In the unlikely event that multiple insurable incidentswhich in aggregate exceed coverage limits occur within the same

insurance period, the total insurance coverage will be allocatedamong Enbridge entities on an equitable basis based on an insuranceallocation agreement among Enbridge and its subsidiaries and a�liates.

Natural Disaster Incident Risk

EIPLP is exposed to the risk of natural disaster incidents acrossmany of its businesses. Natural disaster events include floods,earthquakes, droughts, wildfires, lightning strikes, wind storms,ice storms, hail storms, tornadoes and mudslides. Recent wildfiresin Alberta and their adverse consequences for oil sands operationsdemonstrate the potential nature and extent of natural disasterincident risk for EIPLP.

Across various businesses, risk treatment measures includeconstruction techniques to limit exposure to natural disasterrisk, emergency preparedness plans, business continuity plans,emergency response exercises and insurance in high consequencelocations. EIPLP has made considerable investments in emergencyresponse equipment, training, and additional resources. Insurancecoverage also provides protection from loss or damage to EIPLP’sassets resulting from most natural disaster events.

Information Technology Security or Systems Incident

EIPLP’s infrastructure, applications and data continue to becomemore integrated, creating an increased risk that failure in one systemcould lead to a failure of another system. There is also increasingindustry-wide cyber-attacking activity targeting industrial controlsystems and intellectual property. A successful cyber-attack couldlead to unavailability, disruption or loss of key functionalities withinEIPLP’s industrial control systems which could impact pipelineoperations and potentially result in an environmental or public safetyincident. A successful cyber-attack could also lead to a large scaledata breach resulting in unauthorized disclosure, corruption or loss ofsensitive information which could have lasting reputational impacts toEIPLP and could impact its ability to work with various stakeholders.

The Manager has implemented a comprehensive security strategythat includes a security policy and standards framework, definedgovernance and oversight, layered access controls, continuousmonitoring, infrastructure and network security, threat detectionand incident response through a security operations centre.EIPLP’s security strategy also includes continuing to improve overallintelligence levels related to cyber threat by partnering with a numberof external law enforcement agencies and other organizations withinits industry.

Service Interruption Incident

A service interruption due to a major power disruption or curtailmenton commodity supply could have a significant impact on EIPLP’sability to operate its assets and negatively impact future earnings,relationships with stakeholders and Enbridge’s enterprise-widereputation. Service interruptions that impact EIPLP’s crude oiltransportation services can negatively impact shippers’ operationsand earnings as they are dependent on EIPLP services to movetheir product to market or fulfill their own contractual arrangements.EIPLP mitigates service interruption risk through its diversified sourcesof supply, storage withdrawal flexibility, backup power systems,critical parts inventory and redundancies for critical equipment.


Business Environment Risks

Indigenous Peoples Relations

Canadian judicial decisions have recognized that Indigenous peoples’rights and treaty rights exist in proximity to EIPLP’s operations andfuture project developments. The courts have also confirmed thatthe Crown has a duty to consult with Indigenous peoples when itsdecisions or actions may adversely a�ect Indigenous peoples’ rightsand interests or treaty rights. Crown consultation has the potentialto delay regulatory approval processes and construction, whichmay a�ect project economics. In some cases, respecting Indigenouspeoples’ rights may mean regulatory approval is denied or theconditions in the approval make a project economically challenging.

Given this environment and the breadth of relationships acrossEIPLP’s geographic span, Enbridge has implemented an enterprise-wide Indigenous Peoples Policy. This policy promotes the achievementof participative and mutually beneficial relationships with Indigenouspeoples a�ected by EIPLP’s projects and operations. Specifically,the policy sets out principles governing EIPLP’s relationships withIndigenous peoples and makes commitments to work with Indigenouspeoples so they may realize benefits from EIPLP’s projects andoperations. Notwithstanding EIPLP’s e�orts to this end, the issuesare complex and the impact of Indigenous peoples’ relations onoperations and development initiatives is uncertain. Unless otherwisespecifically stated, none of the content of this policy is incorporatedby reference herein, or otherwise part of, this MD&A.

Special Interest Groups includingNon-Governmental Organizations

EIPLP is exposed to the risk of higher costs, delays or even projectcancellations due to increasing pressure on governments andregulators by special interest groups, including non-governmentalorganizations. Recent judicial decisions have increased the abilityof special interest groups to make claims and oppose projectsin regulatory and legal forums. In addition to issues raised bygroups focused on particular project impacts, EIPLP and othersin the energy and pipeline businesses are facing opposition fromorganizations opposed to oil sands development and shipmentof production from oil sands regions.

Enbridge and its subsidiaries work proactively with special interestgroups and non-governmental organizations to identify and developappropriate responses to concerns regarding its projects.

Critical Accounting EstimatesDepreciation

Depreciation of property, plant and equipment, EIPLP’s largest assetwith a net book value at December 31, 2016 of $22,455 million(2015 – $21,064 million), or 82% of total assets, is provided followingtwo primary methods. For distinct assets, depreciation is generallyprovided on a straight-line basis over the estimated useful livesof the assets commencing when the asset is placed in service.For largely homogeneous groups of assets with comparable usefullives, the pool method of accounting is followed whereby similar

assets are grouped and depreciated as a pool. When the groupassets are retired or otherwise disposed of, gains and lossesare not reflected in earnings but are booked as an adjustmentto accumulated depreciation.

When it is determined that the estimated service life of an asset nolonger reflects the expected remaining period of benefit, prospectivechanges are made to the estimated service life. Estimates of usefullives are based on third party engineering studies, experience and/orindustry practice. There are a number of assumptions inherentin estimating the service lives of EIPLP’s assets including the levelof development, exploration, drilling, reserves and production ofcrude oil and natural gas in the supply areas served by EIPLP’spipelines as well as the demand for crude oil and natural gas andthe integrity of EIPLP’s systems. Changes in these assumptionscould result in adjustments to the estimated service lives, whichcould result in material changes to depreciation expense in futureperiods in any of EIPLP’s business segments. For certain rate-regulated operations, depreciation rates are approved by theregulator and the regulator may require periodic studies or technicalupdates on useful lives which may change depreciation rates.

Asset Impairment

EIPLP evaluates the recoverability of its property, plant and equipmentwhen events or circumstances such as economic obsolescence,business climate, legal or regulatory changes, or other factorsindicate it may not recover the carrying amount of the assets.EIPLP continually monitors its businesses, the market and businessenvironments to identify indicators that could suggest an assetmay not be recoverable. An impairment loss is recognized when thecarrying amount of the asset exceeds its fair value as determined byquoted market prices in active markets or present value techniques.The determination of the fair value using present value techniquesrequires the use of projections and assumptions regarding futurecash flows and weighted average cost of capital. Any changesto these projections and assumptions could result in revisionsto the evaluation of the recoverability of the property, plantand equipment and the recognition of an impairment loss in theConsolidated Statements of Earnings.

EIPLP also tests goodwill for impairment annually or more frequentlyif events or changes in circumstances indicate that it is more likelythan not that the fair value of a reporting unit is less than its carryingvalue. For the purposes of impairment testing, reporting units areidentified as business operations within an operating segment.EIPLP has the option to first assess qualitative factors to determinewhether it is necessary to perform the two-step goodwill impairmenttest. If the two-step goodwill impairment test is performed, the firststep involves determining the fair value of EIPLP’s reporting unitsinclusive of goodwill and comparing those values to the carryingvalue of each reporting unit. If the carrying value of a reportingunit, including allocated goodwill, exceeds its fair value, goodwillimpairment is measured as the excess of the carrying amountof the reporting unit’s allocated goodwill over the implied fairvalue of the goodwill based on the fair value of the reportingunit’s assets and liabilities.


Regulatory Assets and Liabilities

Certain of EIPLP’s businesses are subject to regulation by variousauthorities, including the NEB, the FERC, the Alberta EnergyRegulator and Manitoba Mineral Resources. Regulatory bodiesexercise statutory authority over matters such as construction,rates and ratemaking and agreements with customers. To recognizethe economic e�ects of the actions of the regulator, the timingof recognition of certain revenues and expenses in these operationsmay di�er from that otherwise expected under U.S. GAAP fornon-rate-regulated entities.

Regulatory assets represent amounts that are expected tobe recovered from customers in future periods through rates.Regulatory liabilities represent amounts that are expectedto be refunded to customers in future periods through ratesor expected to be paid to cover future abandonment costs inrelation to the NEB’s Land Matters Consultation Initiative (LMCI).Long-term regulatory assets are recorded in Deferred amountsand other assets and current regulatory assets are recorded inAccounts receivable and other. Long-term regulatory liabilities areincluded in Other long-term liabilities and current regulatory liabilitiesare recorded in Accounts payable and other. Regulatory assetsare assessed for impairment if EIPLP identifies an event indicativeof possible impairment. The recognition of regulatory assetsand liabilities is based on the actions, or expected future actions,of the regulator. To the extent that the regulator’s actions di�erfrom EIPLP’s expectations, the timing and amount of recoveryor settlement of regulatory balances could di�er significantly fromthose recorded. In the absence of rate regulation, EIPLP wouldgenerally not recognize regulatory assets or liabilities and theearnings impact would be recorded in the period the expensesare incurred or revenues are earned. A regulatory asset or liabilityis recognized in respect of deferred income taxes when it isexpected the amounts will be recovered or settled throughfuture regulator-approved rates. As at December 31, 2016, EIPLP’snet regulatory assets totalled $1,145 million (2015 – $977 million).Refer to Gas Pipelines – Alliance Pipeline System.

Contingent Liabilities

Provisions for claims filed against EIPLP are determined on acase-by-case basis. Case estimates are reviewed on a regularbasis and are updated as new information is received. The processof evaluating claims involves the use of estimates and a high degreeof management judgment. Claims outstanding, the final determinationof which could have a material impact on the financial results of EIPLPand certain of EIPLP’s subsidiaries and investments are detailedin Note 26, Commitments and Contingencies, of the 2016 AnnualConsolidated Financial Statements. In addition, any unassertedclaims that later may become evident could have a material impacton the financial results of EIPLP and certain of EIPLP’s subsidiariesand investments.


Asset retirement obligations (ARO) associated with the retirementof long-lived assets are measured at fair value and recognizedas Other long-term liabilities in the period in which they can bereasonably determined. The fair value approximates the cost a third

party would charge to perform the tasks necessary to retire suchassets and is recognized at the present value of expected futurecash flows. ARO are added to the carrying value of the associatedasset and depreciated over the asset’s useful life. The correspondingliability is accreted over time through charges to earnings andis reduced by actual costs of decommissioning and reclamation.EIPLP’s estimates of retirement costs could change as a resultof changes in cost estimates and regulatory requirements.

Currently, for certain of EIPLP’s assets, there is insu�cient dataor information to reasonably determine the timing of settlement forestimating the fair value of the ARO. In these cases, the ARO costis considered indeterminate for accounting purposes, as thereis no data or information that can be derived from past practice,industry practice or the estimated economic life of the asset.

In 2009, the NEB issued a decision related to the LMCI, whichrequired holders of an authorization to operate a pipeline underthe NEB Act to file a proposed process and mechanism to set asidefunds to pay for future abandonment costs in respect of the sitesin Canada used for the operation of a pipeline. The NEB’s decisionstated that while pipeline companies are ultimately responsiblefor the full costs of abandoning pipelines, abandonment costsare a legitimate cost of providing service and are recoverablefrom the users of the pipeline upon approval by the NEB.

Following the NEB’s final approval of the collection mechanismand the set-aside mechanism for LMCI, EIPLP began collectingand setting aside funds to cover future abandonment costs e�ectiveJanuary 1, 2015. The funds collected are held in trust in accordancewith the NEB decision. The funds collected from shippers arereported within Transportation and other services revenues andRestricted long-term investments. Concurrently, EIPLP reflectsthe future abandonment cost as an increase to Operatingand administrative expense and Other long-term liabilities.

Changes in Accounting PoliciesAdoption of New Standards

Classification of Deferred Taxes on the Statementsof Financial Position

E�ective January 1, 2016, EIPLP elected to early adopt AccountingStandards Update (ASU) 2015-17 and applied the standard on aprospective basis. The amendments require that deferred tax liabilitiesand assets be classified as noncurrent in the Consolidated Statementsof Financial Position. The adoption of the pronouncement did nothave a material impact on EIPLP’s consolidated financial statements.

Simplifying the Accounting for Measurement-PeriodAdjustments in Business Combinations

E�ective January 1, 2016, EIPLP adopted ASU 2015-16 ona prospective basis. The new standard requires that an acquirermust recognize adjustments to provisional amounts that areidentified during the measurement period in the reporting periodin which the adjustment amounts are determined. The adoptionof the pronouncement did not have a material impact on EIPLP’sconsolidated financial statements.



E�ective January 1, 2016, EIPLP adopted ASU 2015-03on a retrospective basis which, as at December 31, 2015, resultedin a decrease in Deferred amounts and other assets of $16 millionand a corresponding decrease in Long-term debt of $16 million.The new standard requires debt issuance costs related toa recognized debt liability to be presented in the ConsolidatedStatements of Financial Position as a direct deduction from thecarrying amount of that debt liability, consistent with the presentationof debt discounts or premiums. Further, e�ective January 1, 2016,EIPLP adopted ASU 2015-15 which clarifies that debt issuancecosts associated with line-of-credit arrangements may bedeferred as an asset and subsequently amortized over the termof the arrangement. The adoption of ASU 2015-15 did not havea material impact on EIPLP’s consolidated financial statements.


E�ective January 1, 2016, EIPLP adopted ASU 2015-02 ona modified retrospective basis, which amended and clarifiedthe guidance on variable interest entities (VIEs). There wasa significant change in the assessment of limited partnershipsand other similar legal entities as VIEs, including the removalof the presumption that the general partner should consolidatea limited partnership. As a result, EIPLP has determined that amajority of the limited partnerships that are currently consolidatedor equity accounted for are VIEs. The amended guidance did notimpact EIPLP’s accounting treatment of such entities; however,material disclosures for VIEs have been provided, as necessary.

Hybrid Financial Instruments Issued in the Form of a Share

E�ective January 1, 2016, EIPLP adopted ASU 2014-16 ona modified retrospective basis. The revised criteria eliminatethe use of di�erent methods in practice in the accounting forhybrid financial instruments issued in the form of a share.The new standard clarifies the evaluation of the economiccharacteristics and risks of a host contract in these hybrid financialinstruments. The adoption of the pronouncement did not havea material impact on EIPLP’s consolidated financial statements.


E�ective January 1, 2016, EIPLP adopted ASU 2014-10 ona retrospective basis. The new standard amends the consolidationguidance to eliminate the development stage entity relief whenapplying the VIE model and evaluating the su�ciency of equityat risk. The adoption of the pronouncement did not have a materialimpact on EIPLP’s consolidated financial statements.



ASU 2017-01 was issued in January 2017 with the intent of clarifyingthe definition of a business with the objective of adding guidanceto assist entities with evaluating whether transactions should beaccounted for as acquisitions (disposals) of assets or businesses.EIPLP is currently assessing the impact of the new standardon the consolidated financial statements. The accounting updateis e�ective for annual and interim periods beginning on or afterDecember 15, 2017 and is to be applied on a prospective basis.

Clarifying the Presentation of Restricted Cashin the Statement of Cash Flows

ASU 2016-18 was issued in November 2016 with the intent to addor clarify guidance on the classification and presentation of changesin restricted cash and restricted cash equivalents within the cashflow statement. The amendments require that changes in restrictedcash and restricted cash equivalents should be included withincash and cash equivalents when reconciling the opening andclosing period amounts shown on the statement of cash flows.EIPLP is currently assessing the impact of the new standardon its consolidated financial statements. The accounting updateis e�ective for fiscal years beginning after December 15, 2017and is to be applied on a retrospective basis.


ASU 2016-16 was issued in October 2016 with the intent of improvingthe accounting for the income tax consequences of intra-entity assettransfers other than inventory. Under the new guidance, an entityshould recognize the income tax consequences of an intra-entitytransfer of an asset, other than inventory, when the transfer occurs.The accounting update is e�ective for annual and interim periodsbeginning on or after December 15, 2017 and is to be appliedon a modified retrospective basis, with early adoption permitted.E�ective January 1, 2017, EIPLP elected to early adopt ASU 2016-16.The adoption of the pronouncement is not anticipated to havea material impact on EIPLP‘s consolidated financial statements.


ASU 2016-15 was issued in August 2016 with the intent of reducingdiversity in practice of how certain cash receipts and cash paymentsare classified in the Consolidated Statements of Cash Flows.The new guidance addresses eight specific presentation issues.EIPLP is currently assessing the impact of the new standard on itsconsolidated financial statements. The accounting update is e�ectivefor annual and interim periods beginning on or after December 15, 2017and is to be applied on a retrospective basis.

Accounting for Credit Losses

ASU 2016-13 was issued in June 2016 with the intent of providingfinancial statement users with more useful information aboutthe expected credit losses on financial instruments and othercommitments to extend credit held by a reporting entity ateach reporting date. Current treatment uses the incurred lossmethodology for recognizing credit losses that delays the recognitionuntil it is probable a loss has been incurred. The amendment addsa new impairment model, known as the current expected credit lossmodel that is based on expected losses rather than incurred losses.Under the new guidance, an entity recognizes as an allowance itsestimate of expected credit losses, which the Financial AccountingStandards Board believes will result in more timely recognitionof such losses. EIPLP is currently assessing the impact of the newstandard on its consolidated financial statements. The accountingupdate is e�ective for annual and interim periods beginning onor after December 15, 2019.


Recognition of Leases

ASU 2016-02 was issued in February 2016 with the intent to increase transparency andcomparability among organizations by recognizing lease assets and lease liabilities onthe Consolidated Statements of Financial Position and disclosing additional key informationabout leasing arrangements. EIPLP is currently assessing the impact of the new standardon its consolidated financial statements. The accounting update is e�ective for fiscal yearsbeginning after December 15, 2018, and is to be applied using a modified retrospective approach.

Recognition and Measurement of Financial Assets and Liabilities

ASU 2016-01 was issued in January 2016 with the intent to address certain aspects of recognition,measurement, presentation, and disclosure of financial assets and liabilities. The amendmentsrevise accounting related to the classification and measurement of investments in equity securities,the presentation of certain fair value changes for financial liabilities measured at fair value, and thedisclosure requirements associated with the fair value of financial instruments. EIPLP is currentlyassessing the impact of the new standard on its consolidated financial statements. The accountingupdate is e�ective for fiscal years beginning after December 15, 2017, and is to be applied by meansof a cumulative-e�ect adjustment to the Statements of Financial Position as of the beginning of thefiscal year of adoption, with amendments related to equity securities without readily determinablefair values to be applied prospectively.

Revenue from Contracts with Customers

ASU 2014-09 was issued in 2014 with the intent of significantly enhancing consistency and comparabilityof revenue recognition practices across entities and industries. The new standard establishes a single,principles-based five-step model to be applied to all contracts with customers and introduces new andenhanced disclosure requirements. The standard is e�ective January 1, 2018. The new revenue standardpermits either a full retrospective method of adoption with restatement of all prior periods presented,or a modified retrospective method with the cumulative e�ect of applying the new standard recognizedas an adjustment to opening retained earnings in the period of adoption. EIPLP is currently assessingwhich transition method to use.

EIPLP has reviewed a sample of its revenue contracts in order to evaluate the e�ect of the newstandard on its revenue recognition practices. Based on EIPLP’s initial assessment, estimatesof variable consideration which will be required under the new standard for certain Liquids Pipelines,Gas Pipelines and Green Power revenue contracts as well as the allocation of the transaction pricefor certain Liquids Pipelines revenue contracts, may result in changes to the pattern or timing of revenuerecognition for those contracts. While EIPLP has not yet completed the assessment, EIPLP‘s preliminaryview is that it does not expect these changes will have a material impact on revenues or earnings/(loss).EIPLP is also developing processes to generate the disclosures required under the new standard.

EIPLP OwnershipAs at February 6,

2016

(number of units outstanding)

Class A units

Held byEnbridge IncomePartnersGP Inc. 38,226

Held byEnbridgeCommercial Trust 382,225,941

382,264,167

Class C units1

Held byEnbridge Inc. 442,923,363

Class D units2

Held byEnbridge Inc. 10,681,161

Class E unit

Held byEnbridge Inc. 1

Special Interest Rights – SIR

Held byEnbridge Inc. 1,000

1 Class C units may, at the option of the holder, be exchanged in whole or in part for ECT Preferred Units, Fund Units or ENF common shares.2 The Class D units may, at the option of the holder, be exchanged for Class C units commencing on the fourth anniversary of the year of issuance.


Independent Auditor’s ReportTo the Partners of Enbridge Income Partners LPWe have audited the accompanying consolidated financial statements of Enbridge Income Partners LP,which comprise the consolidated statements of financial position as at December 31, 2016 andDecember 31, 2015 and the consolidated statements of earnings, comprehensive income, partners’capital and cash flows for each of the three years in the period ended December 31, 2016, and the relatednotes, which comprise a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated financialstatements in accordance with accounting principles generally accepted in the United States of America,and for such internal control as management determines is necessary to enable the preparationof consolidated financial statements that are free from material misstatement, whether due to fraud or error.


Our responsibility is to express an opinion on these consolidated financial statements based on ouraudits. We conducted our audits in accordance with Canadian generally accepted auditing standards.Those standards require that we comply with ethical requirements and plan and perform the auditto obtain reasonable assurance about whether the consolidated financial statements are free frommaterial misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the consolidated financial statements. The procedures selected depend on the auditor’s judgment,including the assessment of the risks of material misstatement of the consolidated financial statements,whether due to fraud or error. In making those risk assessments, the auditor considers internal controlrelevant to the entity’s preparation and fair presentation of the consolidated financial statements inorder to design audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the e�ectiveness of the entity’s internal control. An audit also includes evaluatingthe appropriateness of accounting policies used and the reasonableness of accounting estimates madeby management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is su�cient and appropriate to providea basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financialposition of Enbridge Income Partners LP as at December 31, 2016 and December 31, 2015 and the resultsof its operations and its cash flows for each of the three years in the period ended December 31, 2016in accordance with accounting principles generally accepted in the United States of America.


February 17, 2017

Enbridge Income Partners LP Consolidated Financial Statements 119

Consolidated Statements of EarningsYear endedDecember 31, 2016 20151 20141


Revenues

Transportation andother services 3,602 1,501 1,877

Electricity sales 268 295 258

Revenues – a�liates (Note 25) 52 78 51

3,922 1,874 2,186

Expenses

Operating and administrative 890 1,068 1,087

Operating and administrative, net – a�liates (Note 25) 430 68 (124)

Depreciation and amortization 627 613 549

Environmental costs, net of recoveries (5) (26) (5)

1,942 1,723 1,507

1,980 151 679

Income fromequity investments (Note 11) 187 164 140

Other income (Note 23) 827 50 26

Other income– a�liates (Notes 23 and 25) 102 83 97

Interest expense (Note 16) (125) (20) (6)

Interest expense – a�liates (Note 16) (267) (307) (310)

2,704 121 626

Income taxes recovery/(expense) (Note 22) (407) 59 5

Earnings 2,297 180 631

Special interest rights distributions (Note 19)

Temporary performancedistribution rights (262) (58) –

Incentive distribution rights (47) – –

Earnings attributable to general and limited partners 1,988 122 631

Earnings attributable to general partner interest (Note 19) – – –

Earnings attributable to limited partners’ interests (Note 19) 1,988 122 631

1,988 122 631

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

1 Retrospectively adjusted to furnish comparative information related to the 2015 Transaction and the 2014 Transaction (Note 2).


Consolidated Statements of Comprehensive IncomeYear endedDecember 31, 2016 20151 20141


Earnings 2,297 180 631

Other comprehensive income/(loss), net of tax

Change in unrealized loss on cash flowhedges (115) (94) (119)

Reclassification to earnings of realized cash flowhedges 10 1 (1)

Reclassification to earnings of unrealized cash flowhedges 8 2 –

Change in foreign currency translation adjustment (15) 80 5


Comprehensive incomeattributable to general and limited partners 2,185 169 516




Consolidated Statements of Partners’ CapitalYear endedDecember 31, 2016 20151 20141


General partner’s interest (Note 19)

Balance at beginning of year (6,420) – –

Excess purchaseprice over historical carrying value acquired allocation – (1) –

Redemption value adjustment attributable toClassCandDunits – (1) –

(6,420) (2) –

Allocation from limited partners (2,338) (6,418) –

Balance at endof year (8,758) (6,420) –

Limited partners’ interests –EnbridgeCommercial Trust (Note 19)

Balance at beginning of year – limited partners’ interests – 3,165 1,929

Balance at beginning of year –PurchasedEntities2 – 3,989 3,760

Units issued 718 3,874 1,760

Excess purchaseprice over historical carrying value acquired allocation (6) (7,160) (392)

Equity of former owners of PurchasedEntities allocation – (1,489) (185)

Redemption value adjustment attributable toClassCandDunits (3,003) (8,241) –

Earnings allocation 1,067 (10) 631

Distributions (1,114) (546) (349)

(2,338) (6,418) 7,154

Allocation to general partner 2,338 6,418 –

Balance at endof year – – 7,154

Special interest rights (Note 19)

Balance at beginning of year 2,565 – –

Units issued – 2,565 –

Balance at endof year 2,565 2,565 –

Accumulatedother comprehensive loss (Note 20)

Balance at beginning of year (84) (73) 42


Balance at endof year (196) (84) (73)

Total partners’ capital/(deficit) (6,389) (3,939) 7,081


1 Retrospectively adjusted to furnish comparative information related to the 2015 Transaction and the 2014 Transaction (Note 2).2 Refer to Note 2 for the description of Purchased Entities.


Consolidated Statements of Cash FlowsYear endedDecember 31, 2016 20151 20141



Earnings 2,297 180 631

Depreciation and amortization 627 613 549

Deferred income taxes (recovery)/expense (Note 22) 368 (214) (41)

Changes in unrealized (gains)/loss onderivative instruments, net (Note 21) (512) 1,495 519

Cashdistributions in excess of/(less than) equity earnings 15 (12) 11

Hedge ine�ectiveness (Note 21) 20 3 (3)

Unrealized (gains)/loss on foreign intercompany loan 43 (134) (16)

Gain ondisposition (Note 7) (850) (22) –

Derecognition of regulatory balances – (10) –

Other 38 2 (2)

Changes in operating assets and liabilities (Note 24) (140) 48 52

1,906 1,949 1,700


Additions to property, plant andequipment (2,353) (3,068) (4,356)

Joint venture financing (1) – –

Long-term investments (3) – (6)

Restricted long-term investments (43) (45) –

Purchaseof equity investment – – (835)

Investment in a�liated company – 160 2,530

Additions to intangible assets (1) (8) (117)

Long-term receivable froma�liate (Notes 21 and 25) 18 17 (691)

Acquisition of PurchasedEntities (13) (2,712) –

A�liate loans, net – 325 1

Proceeds fromdisposition (Note 7) 1,080 26 –

Changes in restricted cash – – 2

(1,316) (5,305) (3,472)


A�liate loans, net 346 (2,731) 558

Net change in bank indebtedness and short-termborrowings 138 (105) 27

Net change in commercial paper and credit facility draws (324) 1,180 (105)

Southern Lights project financing repayments – – (352)

Debenture and termnote issues –Southern Lights – – 352

Debenture and termnote issues 796 997 –

Debenture and termnote repayments (14) (262) (4)

Contributions received and shares issuedbyPurchasedEntities (Notes 2, 6 and 11) – 1,916 715

Distributions anddividends paid byPurchasedEntities (Notes 2) – (811) (815)

ClassAunits issued (Note 19) 718 3,874 1,760

Distributions to partners (2,086) (737) (336)

(426) 3,321 1,800

E�ect of translation of foreign denominated cash and cash equivalents – 2 –

Increase/(decrease) in cash andcash equivalents 164 (33) 28

Cash and cash equivalents at beginning of year 129 162 134

Cash and cash equivalents at endof year 293 129 162


Income taxes (recovered)/paid 101 57 (16)

Interest paid 524 494 491




Consolidated Statements of Financial PositionDecember 31, 2016 2015


Assets

Current assets

Cash and cash equivalents 293 129

Accounts receivable andother (Note 8) 550 615

Accounts receivable froma�liates 42 47

Loans to a�liates (Note 25) 3 3

888 794

Property, plant and equipment, net (Note 9) 22,455 21,064

Long-term receivable froma�liate (Notes 21 and 25) 782 826

Investment in a�liated company (Notes 21 and 25) 514 514

Long-term investments (Note 11) 470 490

Restricted long-term investments (Note 12) 83 45

Deferred amounts andother assets (Note 13) 1,736 1,516

Intangible assets, net (Note 14) 103 110

Goodwill 29 29

Deferred income taxes (Note 22) 202 246

27,262 25,634

Liabilities and partners’ capital

Current liabilities

Bank indebtedness 171 33

Accounts payable andother (Note 15) 824 1,126

Accounts payable to a�liates 487 472

Distributions payable to a�liates 179 143

Interest payable 56 45

Loans froma�liates (Note 25) 441 95

Currentmaturities of long-termdebt (Note 16) 16 14

2,174 1,928

Long-termdebt (Note 16) 6,043 5,575

Other long-term liabilities (Note 17) 1,939 2,292

Loans froma�liates (Note 25) 5,801 5,801

Deferred income taxes (Note 22) 1,774 1,275

17,731 16,871

Commitments and contingencies (Note 26)

ClassCunits (Note 19) 15,104 12,189

ClassDunits (Note 19) 341 38

ClassEunit (Note 19) 475 475

15,920 12,702

Partners’ capital

General partner’s capital deficit (8,758) (6,420)

Limited partners’ capital – –

Special interest rights 2,565 2,565

Accumulatedother comprehensive loss (Note 20) (196) (84)

(6,389) (3,939)

27,262 25,634

Variable Interest Entities (Note 10)


Approved by the Board of Directors of Enbridge Income Partners GP Inc., the General Partner of Enbridge Income Partners LP:

Bruce G. Waterman E.F.H. RobertsDirector Director


Notes to the Consolidated Financial Statements1. General Business DescriptionEnbridge Income Partners LP (EIPLP) was formed in 2002 andis involved in the transportation, storage and generation of energy.EIPLP owns interests in liquids transportation and storage assets,including the Canadian Mainline, the Regional Oil Sands System,a 50% interest in the Alliance Pipeline, which transports naturalgas from Canada to the United States, and interests in renewableand alternative power generation assets.

EIPLP is a member of the Fund Group, which also includesEnbridge Commercial Trust (ECT) and Enbridge Income Fund(the Fund). EIPLP holds all of the underlying operating entitiesof the Fund Group through its subsidiaries and investees.Enbridge Inc. (Enbridge), through its wholly-owned subsidiaryEnbridge Management Services Inc. (the Manager), is responsiblefor the operations and day-to-day management of the Fund Group.The Manager also provides administrative and general supportservices to the Fund Group. The limited partners of EIPLPare Enbridge and certain of its subsidiaries and ECT.

As at December 31, 2016 Enbridge held an approximate 54% interestin EIPLP with the remaining 46% held by ECT. Additionally, Enbridgeholds a 51% direct interest in the general partner of EIPLP.

EIPLP conducts its business through three business segments (Note 4):Liquids Pipelines, Gas Pipelines and Green Power. These operatingsegments are strategic business units established by seniormanagement to facilitate the achievement of EIPLP’s long-termobjectives and the objectives of EIPLP’s partners, as well asto aid in resource allocation decisions and to assess operationalperformance. Financing costs, current and deferred income taxesand other costs not attributable to specific business segments arepresented on a consolidated basis.

Liquids Pipelines

Liquids Pipelines consists of common carrier and contract crude oil,natural gas liquids and refined products pipelines, feeder pipelines,gathering systems and terminals in Canada, including CanadianMainline, Regional Oil Sands System, Southern Lights Pipeline,which includes the Canadian portion of Southern Lights Pipeline(Southern Lights Canada) and Class A units of the United Statesportion of Southern Lights Pipeline (Southern Lights US), andFeeder Pipelines and Other.

Gas Pipelines

Gas Pipelines includes EIPLP’s 50% interest in the AlliancePipeline system, which transports liquids-rich natural gas fromnortheast British Columbia, northwest Alberta and the Bakken areaof North Dakota to Channahon, Illinois.

Green Power

Green Power includes renewable and alternative energy generatingfacilities, consisting of wind farms, solar facilities and waste heatrecovery facilities located primarily in the provinces of Alberta,Saskatchewan, Ontario and Quebec.

Eliminations and Other

In addition to the segments noted above, Eliminations and Otherincludes operating and administrative costs and foreign exchangecosts which are not allocated to business segments. Also includedin Eliminations and Other are new business development activities,general corporate investments and elimination of transactionsbetween segments required to present financial performanceand financial position on a consolidated basis.

2. Summary of SignificantAccounting PoliciesThese consolidated financial statements have been preparedin accordance with generally accepted accounting principlesin the United States of America (U.S. GAAP). Amounts are statedin Canadian dollars unless otherwise noted.

EIPLP is permitted to use U.S. GAAP as its primary basis of accountingto enable the Fund to meet its continuous disclosure obligationsunder an exemption granted by securities regulators in Canada.

Basis of Presentation and Use of Estimates

On September 1, 2015, EIPLP acquired 100% interests in the followingentities (collectively, the Purchased Entities) from Enbridge andcertain of its subsidiaries for aggregate consideration of $30.4 billionplus incentive distribution and performance rights, less workingcapital adjustments (the 2015 Transaction):

• Enbridge Pipelines Inc. (EPI)

• Enbridge Pipelines (Athabasca) Inc. (EPAI)

• Enbridge Hardisty Storage Inc.

• Enbridge Southern Lights GP Inc.

• Enbridge Lac Alfred Wind Project GP Inc.

• Enbridge Massif du Sud Wind Project GP Inc.

• Enbridge Blackspring Ridge I Wind Project GP Inc.

• Enbridge Saint Robert Bellarmin Wind Project GP Inc.

On November 7, 2014, EIPLP completed a transaction wherebyindirect wholly-owned subsidiaries of EIPLP acquired from Enbridgea 50% equity interest in the United States portion of Alliance Pipeline(Alliance Pipeline US) and subscribed for and purchased Class AUnits of Enbridge subsidiaries which provide a defined cash flowstream from Southern Lights US (the 2014 Transaction).

The interests acquired in the 2015 Transaction and 2014 Transaction(collectively, the Acquired Interests) were accounted for as transactionsamong entities under common control, similar to a pooling ofinterests, whereby the assets and liabilities acquired were recordedat Enbridge’s historic carrying values. Earnings for the years endedDecember 31, 2015 and 2014 report the results of operationsof the Acquired Interests as though the acquisitions occurredat the beginning of the earliest period presented in these financialstatements. Similarly, comparative information for prior years has

Enbridge Income Partners LP Notes to the Consolidated Financial Statements 125

been retrospectively adjusted to present the results of operationsfor EIPLP and the Acquired Interests on a combined basis.See Notes 6 and 11 for additional disclosure regarding the acquisitionsof the Purchased Entities and Alliance Pipeline US, respectively.

The preparation of financial statements in conformity with U.S. GAAPrequires management to make estimates and assumptions that a�ectthe reported amounts of assets, liabilities, revenues and expenses,as well as the disclosure of contingent assets and liabilities inthe consolidated financial statements. Significant estimates andassumptions used in the preparation of the consolidated financialstatements include, but are not limited to: carrying values of regulatoryassets and liabilities (Note 5); unbilled revenues (Note 8); allowance fordoubtful accounts; depreciation rates and carrying value of property,plant and equipment (Note 9); amortization rates of intangible assets(Note 14); measurement of goodwill; fair value of asset retirementobligations (ARO) (Note 18); fair value of financial instruments (Note 21);provisions for income taxes (Note 22); and commitments andcontingencies (Note 26). Actual results could di�er from these estimates.

Principles of Consolidation

The consolidated financial statements include the accountsof EIPLP, its subsidiaries and variable interest entities (VIEs),for which EIPLP is the primary beneficiary. A VIE is a legal entitythat does not have su�cient equity at risk to finance its activitieswithout additional subordinated financial support or is structuredsuch that equity investors lack the ability to make significantdecisions relating to the entity’s operations through voting rightsor do not substantively participate in the gains and losses of theentity. Upon inception of a contractual agreement, EIPLP performsan assessment to determine whether the arrangement containsa variable interest in a legal entity and whether that legal entityis a VIE. The primary beneficiary has both the power to directthe activities of the VIE that most significantly impact the entity’seconomic performance and the obligation to absorb losses orthe right to receive benefits from the VIE entity that could potentiallybe significant to the VIE. Where EIPLP concludes it is the primarybeneficiary of a VIE, it will consolidate the accounts of that entity.EIPLP assesses all variable interests in the entity and uses itsjudgment when determining if EIPLP is the primary beneficiary.Other qualitative factors that are considered include decision-makingresponsibilities, the VIE capital structure, risk and rewards sharing,contractual agreements with the VIE, voting rights and level ofinvolvement of other parties. A reconsideration of whether anentity is a VIE occurs when there are certain changes in the factsand circumstances related to a VIE. EIPLP assesses the primarybeneficiary determination for a VIE on an ongoing basis, as thereare changes in the facts and circumstances related to a VIE.The consolidated financial statements also include the accountsof any limited partnerships where EIPLP represents the generalpartner and, based on all facts and circumstances, controls suchlimited partnerships, unless the limited partner has substantiveparticipating rights or substantive kick-out rights. For certaininvestments where EIPLP retains an undivided interest in assetsand liabilities, EIPLP records its proportionate share of assets,liabilities, revenues and expenses.

All significant intercompany accounts and transactions areeliminated upon consolidation. Investments and entities overwhich EIPLP exercises significant influence are accounted forusing the equity method.

Earnings Allocation

EIPLP allocates earnings based on the Hypothetical Liquidationat Book Value (HLBV) method. EIPLP applies the HLBV method forallocation of earnings and other comprehensive income/loss (OCI)where cash distributions, including both preference and residualdistributions are not based on the investor’s ownership percentages.Under the HLBV method, a calculation is prepared at each balancesheet date to determine the amount that the partners would receiveif EIPLP were to liquidate all of its assets, as valued in accordancewith U.S. GAAP, and distribute that cash to the respective partners.The di�erence between the calculated liquidation distributionamounts at the beginning and the end of the reporting period, afteradjusting for capital contributions and distributions, is the partners’share of the earnings or loss from EIPLP for the period. The limitedpartners’ capital accounts are limited to the balance of their capitalaccount and any allocation that draws the account to a deficitposition is reallocated to the general partner.

Regulation

Certain of EIPLP’s businesses are subject to regulation by variousauthorities including, but not limited to, the National EnergyBoard (NEB), the Federal Energy Regulatory Commission (FERC),the Alberta Energy Regulator, and Manitoba Mineral Resources.Regulatory bodies exercise statutory authority over matters such asconstruction, rates and ratemaking and agreements with customers.To recognize the economic e�ects of the actions of the regulator,the timing of recognition of certain revenues and expenses in theseoperations may di�er from that otherwise expected under U.S. GAAPfor non rate-regulated entities.

Regulatory assets represent amounts that are expected to berecovered from customers in future periods through rates. Regulatoryliabilities represent amounts that are expected to be refundedto customers in future periods through rates or expected to be paidto cover future abandonment costs in relation to the NEB’s LandMatters Consultation Initiative (LMCI). Long-term regulatory assetsare recorded in Deferred amounts and other assets and currentregulatory assets are recorded in Accounts receivable and other.Long-term regulatory liabilities are included in Other long-termliabilities and current regulatory liabilities are recorded in Accountspayable and other. Regulatory assets are assessed for impairmentif EIPLP identifies an event indicative of possible impairment.The recognition of regulatory assets and liabilities is based onthe actions, or expected future actions, of the regulator. To the extentthat the regulator’s actions di�er from EIPLP’s expectations, the timingand amount of recovery or settlement of regulatory balances coulddi�er significantly from those recorded. In the absence of rateregulation, EIPLP would generally not recognize regulatory assetsor liabilities and the earnings impact would be recorded in the periodthe expenses are incurred or revenues are earned. A regulatory assetor liability is recognized in respect of deferred income taxes when itis expected the amounts will be recovered or settled through futureregulator-approved rates.


Allowance for funds used during construction (AFUDC) is includedin the cost of property, plant and equipment and is depreciatedover future periods as part of the total cost of the related asset.AFUDC includes both an interest component and, if approved bythe regulator, a cost of equity component, which are both capitalizedbased on rates set out in a regulatory agreement. In the absence ofrate regulation, EIPLP would capitalize interest using a capitalizationrate based on its cost of borrowing, whereas the capitalized equitycomponent, the corresponding earnings during the constructionphase and the subsequent depreciation would not be recognized.

For certain regulated operations to which U.S. GAAP guidance forphase-in plans applies, negotiated depreciation rates recoveredin transportation tolls may be less than the depreciation expensecalculated in accordance with U.S. GAAP in early years of long-termcontracts but recovered in future periods when tolls exceeddepreciation. Depreciation expense on such assets is recordedin accordance with U.S. GAAP and no deferred regulatory assetis recorded.

Revenue Recognition

For businesses that are not rate-regulated, revenues are recordedwhen products have been delivered or services have been performed,the amount of revenue can be reliably measured and collectabilityis reasonably assured. Customer credit worthiness is assessed priorto agreement signing as well as throughout the contract duration.Certain revenues from liquids and gas pipeline businesses arerecognized under the terms of committed delivery contracts ratherthan the cash tolls received.

Long-term take-or-pay contracts, under which shippers are obligatedto pay fixed amounts rateably over the contract period regardlessof volumes shipped, may contain make-up rights. Make-up rightsare earned by shippers when minimum volume commitments arenot utilized during the period but under certain circumstancescan be used to o�set overages in future periods, subject to expiryperiods. EIPLP recognizes revenues associated with make-up rightsat the earlier of when the make-up volume is shipped, the make-upright expires or when it is determined that the likelihood thatthe shipper will utilize the make-up right is remote.

For rate-regulated businesses, revenues are recognized in amanner that is consistent with the underlying agreements asapproved by the regulators. From July 1, 2011 onward, CanadianMainline (excluding Lines 8 and 9) earnings are governed bythe Competitive Toll Settlement (CTS), under which revenuesare recorded when services are performed. E�ective on that date,EIPLP prospectively discontinued the application of rate-regulatedaccounting for those assets with the exception of flow-throughincome taxes covered by a specific rate order.

Derivative Instruments and Hedging

Non-qualifying Derivatives

Non-qualifying derivative instruments are used primarily to economicallyhedge foreign exchange, interest rate and commodity price earningsexposure. Non-qualifying derivatives are measured at fair valuewith changes in fair value recognized in earnings in Transportationand other services revenues, Commodity costs, Operating

and administrative expense, Other income/(expense)and Interest expense.

Derivatives in Qualifying Hedging Relationships

EIPLP uses derivative financial instruments to manage itsexposure to changes in commodity prices, foreign exchange rates,interest rates and certain compensation tied to its share price.Hedge accounting is optional and requires EIPLP to documentthe hedging relationship and test the hedging item’s e�ectivenessin o�setting changes in fair values or cash flows of the underlyinghedged item on an ongoing basis. EIPLP presents the earningse�ects of hedging items with the hedged transaction. Derivativesin qualifying hedging relationships are categorized as cash flowhedges, fair value hedges and net investment hedges.

Cash Flow Hedges

EIPLP uses cash flow hedges to manage its exposure to changesin commodity prices, foreign exchange rates and interest rates.The e�ective portion of the change in the fair value of a cash flowhedging instrument is recorded in OCI and is reclassified to earningswhen the hedged item impacts earnings. Any hedge ine�ectivenessis recorded in current period earnings.

If a derivative instrument designated as a cash flow hedge ceasesto be e�ective or is terminated, hedge accounting is discontinuedand the gain or loss at that date is deferred in OCI and recognizedconcurrently with the related transaction. If a hedged anticipatedtransaction is no longer probable, the gain or loss is recognizedimmediately in earnings. Subsequent gains and losses from derivativeinstruments for which hedge accounting has been discontinuedare recognized in earnings in the period in which they occur.

Classification of Derivatives

EIPLP recognizes the fair market value of derivative instrumentson the Consolidated Statements of Financial Position as currentand long-term assets or liabilities depending on the timing ofthe settlements and the resulting cash flows associated with theinstruments. Fair value amounts related to cash flows occurringbeyond one year are classified as non-current.

Cash inflows and outflows related to derivative instruments areclassified as Operating activities on the Consolidated Statementsof Cash Flows.

Balance Sheet O�set

Assets and liabilities arising from derivative instruments may beo�set in the Consolidated Statements of Financial Position whenEIPLP has the legal right and intention to settle them on a net basis.

Transaction Costs

Transaction costs are incremental costs directly related to theacquisition of a financial asset or the issuance of a financial liability.EIPLP incurs transaction costs primarily from the issuance of debtand accounts for these costs as a deduction from Long-term debton the Consolidated Statements of Financial Position. These costsare amortized using the e�ective interest rate method over the lifeof the related debt instrument and are recorded in Interest expense.


Equity Investments

Equity investments over which EIPLP exercises significantinfluence, but does not have controlling financial interests,are accounted for using the equity method. Equity investmentsare initially measured at cost and are adjusted for EIPLP’sproportionate share of undistributed equity earnings or loss.Equity investments are increased for contributions made toand decreased for distributions received from the investees.To the extent an equity investee undertakes activities necessaryto commence its planned principal operations, EIPLP capitalizesinterest costs associated with its investment during such period.

Restricted Long-Term Investments

Long-term investments that are restricted as to withdrawalor usage, for the purposes of the NEB’s LMCI, are presentedas Restricted long-term investments on the ConsolidatedStatements of Financial Position.

Income Taxes

Pursuant to the Income Tax Act (Canada), EIPLP, as a partnership,is not subject to income taxes. However, subsidiary corporationsare taxable and applicable income taxes have been reflectedin these consolidated financial statements.

The liability method of accounting for income taxes is followed forsubsidiary corporations. Deferred income tax assets and liabilitiesare recorded based on temporary di�erences between the tax basesof assets and liabilities and their carrying values for accountingpurposes. Deferred income tax assets and liabilities are measuredusing the tax rate that is expected to apply when the temporarydi�erences reverse. For EIPLP’s regulated operations, a deferredincome tax liability is recognized with a corresponding regulatoryasset to the extent taxes can be recovered through rates. Any interestand/or penalty incurred related to tax is reflected in Income taxes.

Foreign Currency Transactions and Translation

Foreign currency transactions are those transactions whoseterms are denominated in a currency other than the currencyof the primary economic environment in which EIPLP or a reportingsubsidiary operates, referred to as the functional currency.Transactions denominated in foreign currencies are translatedinto the functional currency using the exchange rate prevailing atthe date of transaction. Monetary assets and liabilities denominatedin foreign currencies are translated to the functional currencyusing the rate of exchange in e�ect at the balance sheet date.Exchange gains and losses resulting from translation of monetaryassets and liabilities are included in the Consolidated Statementsof Earnings in the period in which they arise.

Gains and losses arising from translation of foreign operations’functional currencies to EIPLP’s Canadian dollar presentationcurrency are included in the CTA component of AOCI andare recognized in earnings upon sale of the foreign operation.Asset and liability accounts are translated at the exchange ratesin e�ect on the balance sheet date, while revenues and expensesare translated using monthly average exchange rates.


Cash and cash equivalents include short-term investments witha term to maturity of three months or less when purchased.

Restricted Cash

Cash and cash equivalents that are restricted as to withdrawalor usage, in accordance with specific commercial arrangements,are presented as Restricted cash on the Consolidated Statementsof Financial Position.


A�liate long-term notes receivable are measured at amortized costusing the e�ective interest rate method, net of any impairment lossesrecognized. Accounts receivable and other are measured at cost.Interest income is recognized in earnings as it is earned with thepassage of time.

Allowance for Doubtful Accounts

Allowance for doubtful accounts is determined based on collectionhistory. When EIPLP has determined that further collection e�ortsare unlikely to be successful, amounts charged to the allowance fordoubtful accounts are applied against the impaired accounts receivable.

Property, Plant and Equipment

Property, plant and equipment is recorded at historical cost.Expenditures for construction, expansion, major renewals andbetterments are capitalized. Maintenance and repair costs areexpensed as incurred. Expenditures for project developmentare capitalized if they are expected to have future benefit. EIPLPcapitalizes interest incurred during construction for non rate-regulated assets. For rate-regulated assets, AFUDC is includedin the cost of property, plant and equipment and is depreciatedover future periods as part of the total cost of the related asset.AFUDC includes both an interest component and, if approvedby the regulator, a cost of equity component.

Two primary methods of depreciation are utilized. For distinctassets, depreciation is generally provided on a straight-line basisover the estimated useful lives of the assets commencing whenthe asset is placed in service. For largely homogeneous groupsof assets with comparable useful lives, the pool method of accountingfor property, plant and equipment is followed whereby similar assetsare grouped and depreciated as a pool. When group assets are retiredor otherwise disposed of, gains and losses are not reflected in earningsbut are booked as an adjustment to accumulated depreciation.

Deferred Amounts and Other Assets

Deferred amounts and other assets primarily include: costs whichregulatory authorities have permitted, or are expected to permit,to be recovered through future rates including deferred incometaxes; contractual receivables under the terms of long-termdelivery contracts; and derivative financial instruments.


Goodwill

Goodwill represents the excess of the purchase price over thefair value of net identifiable assets on acquisition of a business.The carrying value of goodwill, which is not amortized, is assessedfor impairment annually, or more frequently if events or changesin circumstances arise that suggest the carrying value of goodwillmay be impaired.

For the purposes of impairment testing, reporting units are identifiedas business operations within an operating segment. EIPLP hasthe option to first assess qualitative factors to determine whetherit is necessary to perform the two-step goodwill impairment test.If the two-step goodwill impairment test is performed, the first stepinvolves determining the fair value of EIPLP’s reporting units inclusiveof goodwill and comparing those values to the carrying value of eachreporting unit. If the carrying value of a reporting unit, includingallocated goodwill, exceeds its fair value, goodwill impairment ismeasured as the excess of the carrying amount of the reportingunit’s allocated goodwill over the implied fair value of the goodwillbased on the fair value of the reporting unit’s assets and liabilities.

Intangible Assets

Intangible assets consist primarily of certain software costs,acquired power purchase agreements, land leases andpermits. EIPLP capitalizes costs incurred during the applicationdevelopment stage of internal use software projects. Intangibleassets are amortized on a straight-line basis over their expectedlives, commencing when the asset is available for use.

Impairment

EIPLP reviews the carrying values of its long-lived assets as eventsor changes in circumstances warrant. If it is determined that thecarrying value of an asset exceeds the undiscounted cash flowsexpected from the asset, the asset is written down to fair value.

With respect to investments in debt and equity securities, EIPLPassesses at each balance sheet date whether there is objectiveevidence that a financial asset is impaired by completing aquantitative or qualitative analysis of factors impacting the investment.If there is determined to be objective evidence of impairment, EIPLPinternally values the expected discounted cash flows using observablemarket inputs and determines whether the decline below carryingvalue is other than temporary. If the decline is determined to beother than temporary, an impairment charge is recorded in earningswith an o�setting reduction to the carrying value of the asset.

With respect to other financial assets, EIPLP assesses the assetsfor impairment when it no longer has reasonable assurance oftimely collection. If evidence of impairment is noted, EIPLP reducesthe value of the financial asset to its estimated realizable amount,determined using discounted expected future cash flows.


ARO associated with the retirement of long-lived assets aremeasured at fair value and recognized as Accounts payable andother or Other long-term liabilities in the period in which they canbe reasonably determined. The fair value approximates the costa third party would charge to perform the tasks necessary to retiresuch assets and is recognized at the present value of expectedfuture cash flows. ARO are added to the carrying value of theassociated asset and depreciated over the asset’s useful life.The corresponding liability is accreted over time through chargesto earnings and is reduced by actual costs of decommissioning andreclamation. EIPLP’s estimates of retirement costs could change asa result of changes in cost estimates and regulatory requirements.

For the majority of EIPLP’s assets, it is not possible to makea reasonable estimate of ARO due to the indeterminate timingand scope of the asset retirements.

Commitments, Contingencies andEnvironmental Liabilities

EIPLP expenses or capitalizes, as appropriate, expendituresfor ongoing compliance with environmental regulations that relateto past or current operations. EIPLP expenses costs incurredfor remediation of existing environmental contamination causedby past operations that do not benefit future periods by preventingor eliminating future contamination. EIPLP records liabilities forenvironmental matters when assessments indicate that remediatione�orts are probable and the costs can be reasonably estimated.Estimates of environmental liabilities are based on currentlyavailable facts, existing technology and presently enacted lawsand regulations taking into consideration the likely e�ects of inflationand other factors. These amounts also consider prior experiencein remediating contaminated sites, other companies’ clean-upexperience and data released by government organizations.EIPLP’s estimates are subject to revision in future periods basedon actual costs or new information and are included in Environmentalliabilities and Other long-term liabilities in the Consolidated Statementsof Financial Position at their undiscounted amounts. There isalways a potential of incurring additional costs in connection withenvironmental liabilities due to variations in any or all of the categoriesdescribed above, including modified or revised requirements fromregulatory agencies, in addition to fines and penalties, as wellas expenditures associated with litigation and settlement of claims.EIPLP evaluates recoveries from insurance coverage separatelyfrom the liability and, when recovery is probable, EIPLP recordsand reports an asset separately from the associated liabilityin the Consolidated Statements of Financial Position.

An estimated loss for commitments and contingencies is recognizedwhen, after fully analysing available information, EIPLP determinesit is either probable that an asset has been impaired, or that a liabilityhas been incurred, and the amount of impairment or loss canbe reasonably estimated. When a range of probable loss can beestimated, EIPLP recognizes the most likely amount, or if no amountis more likely than another, the minimum of the range of probableloss is accrued. EIPLP expenses legal costs associated with losscontingencies as such costs are incurred.


3. Changes in Accounting PoliciesAdoption of New Standards

Classification of Deferred Taxes on the Statementsof Financial Position

E�ective January 1, 2016, EIPLP elected to early adopt AccountingStandards Update (ASU) 2015-17 and applied the standard on aprospective basis. The amendments require that deferred tax liabilitiesand assets be classified as noncurrent in the Consolidated Statementsof Financial Position. The adoption of the pronouncement did nothave a material impact on EIPLP’s consolidated financial statements.

Simplifying the Accounting for Measurement-PeriodAdjustments in Business Combinations

E�ective January 1, 2016, EIPLP adopted ASU 2015-16 ona prospective basis. The new standard requires that an acquirermust recognize adjustments to provisional amounts that areidentified during the measurement period in the reporting periodin which the adjustment amounts are determined. The adoptionof the pronouncement did not have a material impact on EIPLP’sconsolidated financial statements.


E�ective January 1, 2016, EIPLP adopted ASU 2015-03 ona retrospective basis which, as at December 31, 2015, resultedin a decrease in Deferred amounts and other assets of $16 millionand a corresponding decrease in Long-term debt of $16 million.The new standard requires debt issuance costs related toa recognized debt liability to be presented in the ConsolidatedStatements of Financial Position as a direct deduction from thecarrying amount of that debt liability, consistent with the presentationof debt discounts or premiums. Further, e�ective January 1, 2016,EIPLP adopted ASU 2015-15 which clarifies that debt issuancecosts associated with line-of-credit arrangements may bedeferred as an asset and subsequently amortized over the termof the arrangement. The adoption of ASU 2015-15 did not havea material impact on EIPLP’s consolidated financial statements.


E�ective January 1, 2016, EIPLP adopted ASU 2015-02 on a modifiedretrospective basis, which amended and clarified the guidance onVIEs. There was a significant change in the assessment of limitedpartnerships and other similar legal entities as VIEs, including theremoval of the presumption that the general partner should consolidatea limited partnership. As a result, EIPLP has determined that a majorityof the limited partnerships that are currently consolidated or equityaccounted for are VIEs. The amended guidance did not impactEIPLP’s accounting treatment of such entities, however, materialdisclosures for VIEs have been provided, as necessary.

Hybrid Financial Instruments Issued in the Form of a Share

E�ective January 1, 2016, EIPLP adopted ASU 2014-16 on a modifiedretrospective basis. The revised criteria eliminate the use of di�erentmethods in practice in the accounting for hybrid financial instrumentsissued in the form of a share. The new standard clarifies the evaluationof the economic characteristics and risks of a host contract in thesehybrid financial instruments. The adoption of the pronouncement didnot have a material impact on EIPLP’s consolidated financial statements.


E�ective January 1, 2016, EIPLP adopted ASU 2014-10 on aretrospective basis. The new standard amends the consolidationguidance to eliminate the development stage entity relief whenapplying the VIE model and evaluating the su�ciency of equityat risk. The adoption of the pronouncement did not have a materialimpact on EIPLP’s consolidated financial statements.



ASU 2017-01 was issued in January 2017 with the intent of clarifyingthe definition of a business with the objective of adding guidanceto assist entities with evaluating whether transactions should beaccounted for as acquisitions (disposals) of assets or businesses.EIPLP is currently assessing the impact of the new standard on theconsolidated financial statements. The accounting update is e�ectivefor annual and interim periods beginning on or after December 15, 2017and is to be applied on a prospective basis.

Clarifying the Presentation of Restricted Cashin the Statement of Cash Flows

ASU 2016-18 was issued in November 2016 with the intent to addor clarify guidance on the classification and presentation of changesin restricted cash and restricted cash equivalents within the cashflow statement. The amendments require that changes in restrictedcash and restricted cash equivalents should be included withincash and cash equivalents when reconciling the opening andclosing period amounts shown on the statement of cash flows.EIPLP is currently assessing the impact of the new standardon its consolidated financial statements. The accounting updateis e�ective for fiscal years beginning after December 15, 2017and is to be applied on a retrospective basis.


ASU 2016-16 was issued in October 2016 with the intent of improvingthe accounting for the income tax consequences of intra-entity assettransfers other than inventory. Under the new guidance, an entityshould recognize the income tax consequences of an intra-entitytransfer of an asset, other than inventory, when the transfer occurs.The accounting update is e�ective for annual and interim periodsbeginning on or after December 15, 2017 and is to be appliedon a modified retrospective basis, with early adoption permitted.E�ective January 1, 2017, EIPLP elected to early adopt ASU 2016-16.The adoption of the pronouncement is not anticipated to havea material impact on EIPLP‘s consolidated financial statements.



ASU 2016-15 was issued in August 2016 with the intent ofreducing diversity in practice of how certain cash receipts and cashpayments are classified in the Consolidated Statements of CashFlows. The new guidance addresses eight specific presentationissues. EIPLP is currently assessing the impact of the new standardon its consolidated financial statements. The accounting updateis e�ective for annual and interim periods beginning on or afterDecember 15, 2017 and is to be applied on a retrospective basis.

Accounting for Credit Losses

ASU 2016-13 was issued in June 2016 with the intent of providingfinancial statement users with more useful information aboutthe expected credit losses on financial instruments and othercommitments to extend credit held by a reporting entityat each reporting date. Current treatment uses the incurredloss methodology for recognizing credit losses that delaysthe recognition until it is probable a loss has been incurred.The amendment adds a new impairment model, known as thecurrent expected credit loss model that is based on expectedlosses rather than incurred losses. Under the new guidance,an entity recognizes as an allowance its estimate of expectedcredit losses, which the Financial Accounting Standards Boardbelieves will result in more timely recognition of such losses.EIPLP is currently assessing the impact of the new standardon its consolidated financial statements. The accounting updateis e�ective for annual and interim periods beginning on or afterDecember 15, 2019.

Recognition of Leases

ASU 2016-02 was issued in February 2016 with the intent toincrease transparency and comparability among organizationsby recognizing lease assets and lease liabilities on the ConsolidatedStatements of Financial Position and disclosing additional keyinformation about leasing arrangements. EIPLP is currentlyassessing the impact of the new standard on its consolidatedfinancial statements. The accounting update is e�ective for fiscalyears beginning after December 15, 2018, and is to be appliedusing a modified retrospective approach.

Recognition and Measurement of Financial Assetsand Liabilities

ASU 2016-01 was issued in January 2016 with the intent to addresscertain aspects of recognition, measurement, presentation,and disclosure of financial assets and liabilities. The amendmentsrevise accounting related to the classification and measurementof investments in equity securities, the presentation of certain fairvalue changes for financial liabilities measured at fair value, and thedisclosure requirements associated with the fair value of financialinstruments. EIPLP is currently assessing the impact of the newstandard on its consolidated financial statements. The accountingupdate is e�ective for fiscal years beginning after December 15, 2017,and is to be applied by means of a cumulative-e�ect adjustmentto the Statements of Financial Position as of the beginning of thefiscal year of adoption, with amendments related to equity securitieswithout readily determinable fair values to be applied prospectively.

Revenue from Contracts with Customers

ASU 2014-09 was issued in 2014 with the intent of significantlyenhancing consistency and comparability of revenue recognitionpractices across entities and industries. The new standardestablishes a single, principles-based five-step model to be appliedto all contracts with customers and introduces new and enhanceddisclosure requirements. The standard is e�ective January 1, 2018.The new revenue standard permits either a full retrospectivemethod of adoption with restatement of all prior periods presented,or a modified retrospective method with the cumulative e�ectof applying the new standard recognized as an adjustmentto opening retained earnings in the period of adoption.EIPLP is currently assessing which transition method to use.

EIPLP has reviewed a sample of its revenue contracts in orderto evaluate the e�ect of the new standard on its revenuerecognition practices. Based on EIPLP’s initial assessment,estimates of variable consideration which will be required underthe new standard for certain Liquids Pipelines, Gas Pipelinesand Green Power revenue contracts as well as the allocationof the transaction price for certain Liquids Pipelines revenuecontracts, may result in changes to the pattern or timing of revenuerecognition for those contracts. While EIPLP has not yet completedthe assessment, EIPLP‘s preliminary view is that it does notexpect these changes will have a material impact on revenueor earnings/(loss). EIPLP is also developing processes to generatethe disclosures required under the new standard.


4. Segmented Information

Year ended December 31, 2016Liquids

Pipelines Gas

PipelinesGreenPower

Eliminationsand Other Consolidated


Revenues 3,609 – 313 – 3,922

Operating and administrative (1,232) – (66) (22) (1,320)

Depreciation and amortization (518) – (109) – (627)

Environmental costs, net of recoveries 5 – – – 5

1,864 – 138 (22) 1,980

Income/(loss) fromequity investments – 188 (1) – 187

Other income 906 6 1 16 929

Earnings/(loss) before interest and income taxes 2,770 194 138 (6) 3,096

Interest expense (392)

Income taxes (407)

Special interest rights distributions (309)

Earnings attributable to general and limited partners 1,988

Additions to property, plant andequipment1 2,349 – 4 – 2,353

Total assets 23,659 423 2,254 926 27,262

Year endedDecember 31, 2015Liquids

PipelinesGas

PipelinesGreenPower



Revenues 1,552 – 322 – 1,874

Operating and administrative (1,060) – (58) (18) (1,136)



14 – 155 (18) 151

Income/(loss) fromequity investments – 166 (2) – 164

Other income/(expense) (15) (22) 1 169 133

Earnings/(loss) before interest and income taxes (1) 144 154 151 448


Income taxes recovery 59

Special interest rights distributions (58)

Earnings attributable to general and limited partners 122


Total assets 22,003 438 2,363 830 25,634

Year endedDecember 31, 2014Liquids

PipelinesGas

PipelinesGreenPower



Revenues 1,910 – 276 – 2,186

Operating and administrative (906) – (56) (1) (963)



555 – 125 (1) 679

Income/(loss) fromequity investments – 138 2 – 140

Other income/(expense) 20 (6) – 109 123

Earnings before interest and income taxes 575 132 127 108 942


Income taxes recovery 5

Earnings attributable to general and limited partners 631


1 Includes allowance for equity funds used during construction of nil for the year ended December 31, 2016 (2015 – nil; 2014 – $3 million).

The measurement basis for preparation of segmented information is consistent with the significantaccounting policies (Note 2).


5. Financial Statement E�ectsof Rate RegulationGeneral Information on Rate Regulationand its Economic E�ects

The Canadian Mainline and Southern Lights Pipeline businesseswithin EIPLP are subject to regulation by the NEB. EIPLP alsocollects and sets aside funds to cover future pipeline abandonmentcosts for all NEB regulated pipelines as a result of the NEB’sregulatory requirements under LMCI (Note 12). Amounts expectedto be paid to cover future abandonment costs are recognizedas long-term regulatory liabilities. EIPLP’s significant regulatedbusinesses and other related accounting impacts aredescribed below.

Canadian Mainline

Canadian Mainline includes the Canadian portion of the mainlinesystem and is subject to regulation by the NEB. Canadian Mainlinetolls (excluding Lines 8 and 9) are currently governed by the 10-yearCTS, which establishes a Canadian Local Toll for all volumes shippedon the Canadian Mainline and an International Joint Tari� for allvolumes shipped from western Canadian receipt points to deliverypoints on Enbridge’s Lakehead System and delivery points on theCanadian Mainline downstream of the Lakehead System. The CTSwas negotiated with shippers in accordance with NEB guidelines,was approved by the NEB in June 2011 and took e�ect July 1, 2011.Under the CTS, a regulatory asset is recognized to o�set deferredincome taxes as a NEB rate order governing flow-through incometax treatment permits future recovery. No other material regulatoryassets or liabilities are recognized under the terms of the CTS.


Southern Lights Canada is regulated by the NEB. Shipperson Southern Lights Canada are subject to long-term transportationcontracts under a cost of service toll methodology. Toll adjustmentsare filed annually with the NEB. Tari�s provide for recovery ofallowable operating and debt financing costs, plus a pre-determinedafter-tax rate of return on equity of 10%. Southern Lights Canadatolls are based on a deemed 70% debt and 30% equity structure.

Saskatchewan Gathering System

The Saskatchewan Gathering System is regulated by theSaskatchewan Ministry of Economy. The Saskatchewan GatheringSystem follows a cost of service methodology. In May 2016, EIPLPreached a Settlement Agreement (the Settlement) with a group ofshippers that revised the tolling methodology on the SaskatchewanGathering System. The regulatory governance of the Settlementchanged and as such, all of the criteria required for the continuedapplication of rate-regulated accounting treatment were no longermet and derecognition of regulatory balances as at May 1, 2016was required. Accordingly, EIPLP recognized a one-time, non-cashloss of $6 million (net of income taxes recovery of $2 million,which was reported within Income taxes recovery/(expense))due to the derecognition of regulatory assets reported within OtherIncome/(expense) on the Consolidated Statements of Earnings.Further, EIPLP recorded a one-time, non-cash gain of $9 millionwithin Income taxes recovery/(expense) on the ConsolidatedStatements of Earnings related to the regulatory liability thatEIPLP had previously recorded in respect of deferred tax.

On December 1, 2016, EIPLP disposed of the SaskatchewanGathering System as part of the sale of the South Prairie Regionassets (Note 7).

Alliance Pipeline

Alliance Pipeline is comprised of two portions. The Canadian portionof Alliance Pipeline (Alliance Pipeline Canada) has tolls and tari�sregulated by the NEB and Alliance Pipeline US has tolls and tari�sregulated by the FERC.

With the expiration of Alliance Pipeline’s transportation serviceagreements in December 2015, Alliance Pipeline announced a NewServices Framework and the related tolls and tari� provisions requiredto implement the new services (collectively, New Services Framework).Pursuant to the New Services Framework, Alliance Pipeline retainsexposure to potential variability in certain future costs and throughputvolumes. As such, the majority of Alliance Pipeline’s operations nolonger meet all of the criteria required for the continued applicationof rate-regulated accounting treatment and derecognitionof regulatory balances as at June 30, 2015 was required.

EIPLP’s equity pick-up of Alliance Pipeline for the year endedDecember 31, 2015, recorded in Income from equity investmentson the Consolidated Statements of Earnings, included a one-time,non-cash gain of $8 million, before tax of $3 million, due tothe derecognition of regulatory liabilities within Alliance Pipeline.Further, EIPLP recorded a one-time, non-cash loss of $16 millionwithin Income taxes on the Consolidated Statements of Earningsrelated to the regulatory asset that had previously been recordedin respect of Alliance Pipeline Canada deferred income tax.


Financial Statement E�ects

Accounting for rate-regulated activities has resulted in the recognition of the following significantregulatory assets and liabilities:

December 31, 2016 2015


Regulatory assets/(liabilities)

LiquidsPipelines

Deferred income taxes1 1,270 1,048

Transportation revenue adjustment2 – 11

Pipeline future abandonment costs3 (88) (43)

Tolling deferrals4 (37) (39)

1 The deferred income tax asset represents the regulatory o�set to deferred income tax liabilities that are expected to be recovered under flow-through income tax treatment.The recovery period depends on future reversal of temporary di�erences.

2 The transportation revenue adjustment is the cumulative di�erence between actual expenses incurred and estimated expenses included in transportation tolls.Transportation revenue adjustments are not included in the rate base.

3 The pipeline future abandonment costs liability results from amounts collected and set aside in accordance with the NEB’s LMCI to cover future abandonment costs for NEBregulated Canadian pipelines. Funds collected are included in Restricted long-term investments (Note 12). Concurrently, EIPLP reflects the future abandonment cost as a regulatoryliability. The settlement of this balance will occur as pipeline abandonment costs are incurred.

4 The tolling deferrals reflect net tax benefits expected to be refunded through future transportation tolls on Southern Lights Canada. The balance is expected to accumulate through2018 before being refunded through tolls. Tolling deferrals are not included in the rate base.

Other Items A�ected by Rate Regulation

Allowance for Funds Used During Construction and Other Capitalized Costs

Under the pool method prescribed by certain regulators, it is not possible to identify the carryingvalue of the equity component of AFUDC or its e�ect on depreciation. Similarly, gains and losseson the retirement of certain specific fixed assets in any given year cannot be identified or quantified.

6. AcquisitionsPurchased Entities

On September 1, 2015, EIPLP acquired 100% interests in the Purchased Entities from Enbridge andcertain subsidiaries of Enbridge. Consideration was $33.2 billion, inclusive of working capital adjustments.

The components of the consideration for this acquisition were as follows:

September 1, 2015

(millions of Canadian dollars, except for unit amounts)

Cash1 2,725

ClassCunits (442,923,363units at $35.44per unit) (Note 19) 15,697

ClassEunit (Note 19) 475

Special interest rights (1,000units) (Note 19) 2,565

Long-termdebt assumed 11,707

33,169

1 Includes a final working capital adjustment of $13 million recognized on March 30, 2016.

The acquisition of the Purchased Entities was accounted for as a transaction between entities undercommon control, similar to a pooling of interests, whereby the assets and liabilities of the PurchasedEntities were recorded at Enbridge’s historic carrying values, with any di�erence from considerationpaid charged to partners’ capital.


The final purchase price was recorded as follows:

September 1, 2015


Cash 37

Accounts receivable andother 426

Accounts receivable froma�liates 13

Property, plant and equipment, net 18,192

Investment in a�liated company (Note 25) 514

Long-term investments 22

Deferred amounts andother assets 1,410

Intangible assets, net 136

Accounts payable andother (912)

Accounts payable to a�liates (311)

Interest payable (42)

Other long-term liabilities (1,970)

Loans froma�liates (Note 25) (239)

Deferred income taxes (892)

16,384

Excess purchaseprice over book value of net assets acquired1 16,785

Total consideration 33,169

1 Includes a final working capital adjustment of $13 million recognized on March 30, 2016.

Other Acquisitions

In December 2014, EPI, a subsidiary of EIPLP, acquired an incremental 30% interest in the Massif du SudWind Project (Massif du Sud) for cash consideration of $102 million, bringing its total interest in the windproject to 80%. EPI acquired its original 50% interest in Massif du Sud in December 2012. EPI’s interestin Massif du Sud represents an undivided interest, with $97 million of the incremental purchase allocatedto Property, plant and equipment and the remainder allocated to Intangible assets. Massif du Sud isoperational and is presented within the Green Power segment.

In October 2014, EPI acquired an incremental 17.5% interest in the Lac Alfred Wind Project (Lac Alfred)for cash consideration of $121 million, bringing its total interest in the wind project to 67.5%. EPI acquiredits original 50% interest in Lac Alfred in December 2011. EPI’s interest in Lac Alfred representsan undivided interest, with $115 million of the incremental purchase allocated to Property, plant andequipment and the remainder allocated to Intangible assets. Lac Alfred is operational and is presentedwithin the Green Power segment.

7. DispositionsSouth Prairie Region

On December 1, 2016, EIPLP completed the sale of the South Prairie Region assets, which includes theSaskatchewan Gathering System, to an unrelated party for cash proceeds of $1.08 billion. A gain on saleof $850 million before tax was recognized in Other Income on the Consolidated Statement of Earnings.The South Prairie Region assets were included within EIPLP’s Liquids Pipelines segment. For the yearended December 31, 2016, pre-tax earnings for the South Prairie Region assets were $41 million.

Other Dispositions

On May 1, 2015, EIPLP sold certain Virden crude oil pipeline system assets to an unrelated party forproceeds of $26 million before closing costs. The gain on disposition was $22 million, before tax of$3 million, and was presented within Other income/(expense) on the Consolidated Statements of Earnings.


8. Accounts Receivable and OtherDecember 31, 2016 2015


Unbilled revenues 330 164

Trade receivables 130 294

Taxes receivable 14 2

Short-termportion of derivative assets (Note 21) 10 7

Inventory 2 3

Prepaid expenses anddeposits 51 72

Current deferred income taxes (Note 22) – 40

Other 16 33

Allowance for doubtful accounts (3) –

550 615

9. Property, Plant and Equipment

December 31,Weighted AverageDepreciation Rate 2016 2015


LiquidsPipelines

Pipeline 2.4% 13,177 13,192

Pumping equipment, buildings, tanks andother 2.5% 6,929 6,922

Land and right-of-way 2.0% 240 244

Under construction – 4,422 2,718

24,768 23,076

Accumulated depreciation (4,373) (4,174)

20,395 18,902

GreenPower

Wind turbines, solar panels andother 4.0% 2,593 2,593

Under construction – 5 3

2,598 2,596

Accumulated depreciation (538) (434)

2,060 2,162

22,455 21,064

Depreciation expense for the year ended December 31, 2016 was $615 million (2015 – $573 million; 2014– $513 million).

10. Variable Interest EntitiesConsolidated Variable Interest Entities

Enbridge SL Holdings LP

Enbridge SL Holdings LP (SL Holdings LP) is a Canadian limited partnership which holds the Canadianportion of Southern Lights Pipeline. SL Holdings LP is considered a VIE as it does not have su�cient equityat risk to finance its activities without additional subordinated financial support. As the partnership is 100%owned and directed by EIPLP and/or its subsidiaries with no third parties having the ability to direct anyof the significant activities, EIPLP is considered the primary beneficiary. At December 31, 2016, the totalcarrying amounts of current liabilities and long-term liabilities of SL Holdings LP on the ConsolidatedStatements of Financial Position were $52 million and $311 million, respectively (2015 – $45 million and$326 million, respectively). The creditors of SL Holdings LP do not have recourse to EIPLP’s general credit,other than through nominal assets of the holding company with the general partnership interest.

Other Limited Partnerships

By virtue of a lack of substantive kick-out rights and participating rights, substantially all limited partnershipswholly-owned by EIPLP and/or its subsidiaries are considered VIEs. As these entities are 100% ownedand directed by EIPLP with no third parties having the ability to direct any of the significant activities,EIPLP is considered the primary beneficiary.


At December 31, 2016, the total carrying amounts of current liabilities and long-term liabilities forthese limited partnerships on the Consolidated Statements of Financial Position were $19 millionand $67 million, respectively (2015 – $27 million and $74 million, respectively). The creditors of theseVIEs do not have recourse to EIPLP’s general credit, other than through nominal assets of the holdingcompany with the general partnership interest.

Unconsolidated Variable Interest Entity

EIPLP currently holds a long-term receivable in Southern Lights Holdings, L.L.C. (SL Holdings LLC),an indirect wholly-owned subsidiary of Enbridge, which holds Southern Lights US. The long-termreceivable consists of EIPLP’s ownership of Class A Units of SL Holdings LLC and provides EIPLP witha defined cash flow stream from Southern Lights US. SL Holdings LLC is considered a VIE as it doesnot have su�cient equity at risk to finance its activities without additional subordinated financial support.As the units owned by EIPLP do not allow for it to vote on any significant matters or share in any decisionmaking with respect to the VIE’s operations, EIPLP is not considered the primary beneficiary of the VIE.EIPLP’s maximum exposure to loss equates to the carrying amount of EIPLP’s long-term receivable inthe VIE, a value of which declines to nil over the life of the investment. The carrying value of the long-termreceivable in SL Holdings LLC is $801 million as at December 31, 2016 (2015 – $844 million) includedin Accounts receivable from a�liates and Long-term receivable from a�liate on the ConsolidatedStatements of Financial Position.

11. Long-Term Investments

December 31,Ownership

Interest 2016 2015


Equity Investments

GasPipelines

AlliancePipeline 50% 419 436

GreenPower

NRGreenPower LimitedPartnership 50% 47 50

Other 50% 4 4

470 490

Summarized combined financial information of EIPLP’s interests accounted for under the equity methodis as follows:



Revenues 474 464 445

Operating and administrative expense (172) (139) (145)

Depreciation and amortization (69) (111) (106)

Other income/(expense) (13) 5 2

Interest expense (33) (55) (56)

Earnings before income taxes 187 164 140

1 On November 7, 2014, EIPLP acquired a 50% equity interest in Alliance Pipeline US from indirect wholly-owned subsidiaries of Enbridge. The purchase was accounted for asa transaction between entities under common control, similar to a pooling of interests, whereby the investment in Alliance Pipeline US was recorded at Enbridge’s historic carryingvalues, with any di�erence from consideration paid charged to Partners’ capital.

December 31, 2016 2015


Current assets 152 103

Property, plant and equipment, net 1,141 1,211

Deferred amounts andother assets 14 27

Current liabilities (122) (108)

Long-termdebt (684) (720)

Other long-term liabilities (31) (23)

Net assets 470 490

Certain assets of Alliance Pipeline are pledged as collateral to Alliance Pipeline’s lenders.


12. Restricted Long-Term InvestmentsE�ective January 1, 2015, EIPLP began collecting and setting aside funds to cover future pipelineabandonment costs for all NEB regulated pipelines as a result of the NEB’s regulatory requirementsunder LMCI. The funds collected are held in trusts in accordance with the NEB decision. The fundscollected from shippers are reported within Transportation and other services revenues on theConsolidated Statements of Earnings and Restricted long-term investments on the ConsolidatedStatements of Financial Position. Concurrently, EIPLP reflects the future abandonment cost asan increase to Operating and administrative expense on the Consolidated Statements of Earningsand Other long-term liabilities on the Consolidated Statements of Financial Position.

As at December 31, 2016, EIPLP had restricted long-term investments held in trust, invested in CanadianTreasury bonds, and are classified as held for sale and carried at fair value of $83 million (2015 – $45).As at December 31, 2016, EIPLP had estimated future abandonment costs of $88 million (2015 – $43)related to LMCI.

13. Deferred Amounts and Other AssetsDecember 31, 2016 2015


Regulatory assets (Note 5) 1,277 1,066

Contractual receivables 437 437

Long-termportion of derivative assets (Note 21) 10 9

Deferred financing costs 12 4

1,736 1,516

As at December 31, 2016, deferred amounts of $27 million (2015 – $25 million) were subjectto amortization and are presented net of accumulated amortization of $16 million (2015 – $14 million).Amortization expense for the year ended December 31,2016 was $3 million (2015 – $2 million; 2014 – nil).

14. Intangible Assets

December 31, 2016Weighted AverageAmortization Rate Cost

AccumulatedAmortization Net


Software 5.3% 41 27 14

Power purchase agreements 4.0% 66 12 54

Land leases, permits andother 3.9% 42 7 35

149 46 103

December 31, 2015Weighted AverageAmortization Rate Cost

AccumulatedAmortization Net


Software 10.0% 54 36 18

Power purchase agreements 4.2% 72 11 61

Land leases, permits andother 4.1% 35 4 31

161 51 110

Amortization expense for intangible assets for the year ended December 31, 2016 was $7 million(2015 – $36 million; 2014 – $33 million). EIPLP expects amortization expense for intangible assetsfor the years ending December 31, 2017 through 2021 of $6 million, $6 million, $6 million, $6 millionand $5 million, respectively.


15. Accounts Payable and OtherDecember 31, 2016 2015


Operating accrued liabilities 225 228

Tradepayables 34 110

Construction payables 241 316

Deferred revenue 138 88

Current derivative liabilities (Note 21) 10 87

Construction deposits 81 83

Contractor holdbacks 51 115

Taxes payable 2 59

Other 42 40

824 1,126

16. Debt

December 31,

WeightedAverage

Interest Rate Maturity 2016 2015


EnbridgePipelines Inc.

Medium-termnotes1 4.5% 4,525 3,725

Debentures 8.2% 2024 200 200

Commercial paper and credit facility draws 1,032 1,346

Other2 4 4

EnbridgeSouthern Lights LP

Medium-termnotes 4.0% 2040 323 336

Other3 (25) (22)

Total debt 6,059 5,589

Currentmaturities (16) (14)


1 Included in medium-term notes is $100 million with a maturity date of 2112.2 Primarily capital lease obligations.3 Primarily debt discount.

For the years ending December 31, 2017 through 2021, debenture and term note maturities are$16 million, $318 million, $318 million, $365 million, $16 million, respectively, and $4,015 million thereafter.EIPLP’s debentures and term notes bear interest at fixed rates and the interest obligations for theyears ending December 31, 2017 through 2021 are $226 million, $238 million, $211 million, $189 millionand $180 million, respectively. As at December 31, 2016 and 2015, all debt was unsecured.

Interest Expense



Debentures and termnotes 265 194 165

Commercial paper and credit facility draws 15 7 3

Southern Lights project financing – – 13

Interest on loans froma�liated companies (Note 25) 267 307 310

Capitalized (155) (181) (175)

392 327 316

2018 – 2046


Credit Facilities

2016 2015

December 31, Maturity Total Facilities Draws1 Available Total Facilities


EnbridgePipelines Inc. 2018 3,000 1,032 1,968 3,000

EnbridgeSouthern Lights LP 2018 5 – 5 5

Total committed credit facilities 3,005 1,032 1,973 3,005

1 Includes facility draws, letters of credit and commercial paper issuances that are back-stopped by the credit facility.

Credit facilities carry a weighted average standby fee of 0.2% per annum on the unused portion anddraws bear interest at market rates. Certain credit facilities serve as a back-stop to the commercial paperprograms and EIPLP has the option to extend the facilities, which are currently set to mature in 2018.

Commercial paper and credit facility draws of $1,032 million (2015 – $1,346 million) are supported by theavailability of long-term committed credit facilities and therefore have been classified as long-term debt.

17. Other Long-Term LiabilitiesDecember 31, 2016 2015


Derivative liabilities (Note 21) 1,647 2,096

Asset retirement obligations (Note 18) 71 46

Regulatory liabilities (Note 5) 118 83

Other 103 67

1,939 2,292

18. Asset Retirement ObligationsThe liability for the expected cash flows as recognized in the financial statements reflected discountrates ranging from 4.6% to 9.4% (2015 – 4.6% to 9.4%). A reconciliation of movements in EIPLP’s AROis as follows:

December 31, 2016 2015


Obligations at beginning of year 46 73

Liabilities incurred – 2

Liabilities settled (21) (31)

Change in estimates 43 –

Accretion expense 3 2

Obligations at endof year 71 46

Presented as follows:

Other long-term liabilities (Note 17) 71 46

71 46

In 2014, ARO in the amount of $50 million was recognized relating to the Canadian portion of the Line 3Replacement Program, which is targeted to be completed in 2019, whereby EIPLP will replace the existingLine 3 pipeline in Canada.


19. Partners’ InterestsAs at December 31, 2016, the general partner interest included Class A units and the limited partners’interests included Class A units, Class C units and Class D units. EIPLP also had one Class E unitand Special Interest Rights (SIR) outstanding at December 31, 2016. The limited partners have limitedrights of ownership as provided for under the partnership agreement and, as discussed below, the rightto participate in distributions. The general partner manages operations and participates in distributions.

Earnings are allocated to the general partner and limited partners based on the HLBV method.All other amounts are allocated on a pro-rata basis between the partners based on their relativeownership percentages, inclusive of amounts arising as a result of the 2015 Transaction which wereallocated to units in existence on the closing date of the 2015 Transaction. The limited partners’ capitalaccounts are limited to the balance of their capital account, and any allocation that draws the accountto a deficit position is reallocated to the general partner.

Exchangeable Units

Class C Units

2016 2015

December 31,Numberof units Amount

Numberof units Amount


Balance at beginning of period 443 12,189 – –

ClassCunits issued1 – – 443 15,697

Excess purchaseprice over historical carrying value acquired allocation (Note 6) – (7) – (9,611)

Equity of former owners of PurchasedEntities allocation2 – – – (1,997)

Earnings allocation – 900 – 132

ClassCunit distribution – (952) – (279)

443 12,130 443 3,942

Fairmarket value adjustment – 2,974 – 8,247

Balance at endof period 443 15,104 443 12,189

1 Issued as part of the 2015 Transaction (Notes 2 and 6).2 Results from the retrospective adjustment to furnish comparative information related to the 2015 Transaction (Note 2).

An unlimited number of Class C units are authorized. Class C units have direct voting rights and areentitled to non-cumulative distributions equivalent to distribution amounts on an ECT Preferred Unitand an ordinary trust unit of the Fund (Fund Unit) for the same distribution period. The holders ofClass C units have an exchange right which allows for an exchange of the Class C units for Fund Units,ECT Preferred Units or common shares of ENF on a one-for-one basis at any time (Class C ExchangeRight). Due to the Class C Exchange Right, the Class C units are classified as Mezzanine equityon the Consolidated Statements of Financial Position and recorded at their fair market value

Class D Units

2016 2015




Balance at beginning of period 1 38 – –

ClassDunits issued 1 9 266 1 44

Earnings allocation – 21 – –

ClassDunit distribution2 – (13) – (1)

10 312 1 43

Fairmarket value adjustment – 29 – (5)

Balance at endof period 10 341 1 38

1 Class D units issued on payment of TPDR distributions.2 0.4 million Class D units issued on payment of Class D unit distributions.


Class D units are issued pursuant to the Temporary Performance Distribution Right (TPDR) distributionsin respect of the SIR. Class D units have direct voting rights and are entitled to non-cumulative distributionsin the same amount as distributions paid in respect of a Class C unit. Distributions are paid-in-kindwith newly issued Class D units equal to the amount of distribution declared payable, determined usingthe volume weighted average price of an ENF share for the five trading days prior to the distributiondate. The holders of Class D units have an exchange right which allows for an exchange of the Class Dunits for Class C units at a deemed price per Class C unit benchmarked to the market price of an ENFshare on the date of exchange (Class D Exchange Right). The Class D Exchange Right commenceson the fourth anniversary of the year of issuance. Due to the Class D Exchange Right, the Class D unitsare classified as Mezzanine equity on the Consolidated Statements of Financial Position and recordedat their fair market value.

Class E Unit

2016 2015



(millions of Canadian dollars, except number of units)

Balance at beginning of year 1 475 – –

ClassEunit issued1 – – 1 475

Balance at endof year 1 475 1 475

1 Issued as part of the 2015 Transaction (Notes 2 and 6).

One Class E unit has been authorized and issued. The Class E unit does not receive distributions otherthan being entitled to receive a distribution amount approximately equal to the after-tax redemptionamount of the Enbridge Employee Services Canada Inc. (EESCI) Series A Preferred Shares (Note 25), whichwill be paid in priority to all other distributions payable upon redemption of the EESCI Series A PreferredShares. The Class E unit has no voting rights, except in limited circumstances. The Class E unit isredeemable for a redemption price equal to the Class E distribution. Due to the redemption feature,the Class E unit is classified as Mezzanine equity on the Consolidated Statements of Financial Positionand recorded at its maximum redemption value.

Non-Exchangeable Units

Class A Units

2016 2015 2014





Balance at beginning of year 357 8,923 245 5,049 187 3,289

ClassAunits issued1 25 718 112 3,874 58 1,760

Balance at endof year 382 9,641 357 8,923 245 5,049

1 In April 2016, 25 million Class A units were issued for gross proceeds of $718 million. In November 2015, 27 million Class A units were issued for gross proceeds of $874 million.In September 2015, 85 million Class A units were issued for gross proceeds of $3,000 million as part of the 2015 Transaction (Notes 2 and 6). In November 2014, 58 million Class Aunits were issued for gross proceeds of $1,760 million as part of the 2014 Transaction (Notes 2 and 11).

An unlimited number of Class A units are authorized. Class A units have direct voting rights. Class A unitdistributions are equal to the distributable cash less the aggregate of all distributions properly payableon any other class of units and SIR.


Preference Rights

Special Interest Rights

2016 2015



(millions of Canadian dollars, except number of units)

Balance at beginning of year 1,000 2,565 – –

Special interest rights issued – – 1,000 2,565

Balance at endof year 1,000 2,565 1,000 2,565

1 Issued as part of the 2015 Transaction (Notes 2 and 6).

An unlimited number of SIR are authorized. SIR have no direct voting rights, except in limitedcircumstances. The holders of SIR are entitled to receive Incentive Distribution Right (IDR) and TPDRdistributions in priority to any distributions which are to be paid to holders of any other units, exceptthe Class E unit. IDR distributions occur when the Fund Unit distribution rate exceeds $1.890 per unitand are paid in cash. TPDR distributions occur when the Fund Unit distribution rate exceeds $1.295 perunit and are paid in the form of Class D units

20. Components of Accumulated Other Comprehensive LossChanges in AOCI for the years ended December 31, 2016, 2015 and 2014, are as follows:

Cash FlowHedges

CumulativeTranslationAdjustment Total


Balance at January 1, 2016 (172) 88 (84)

Other comprehensive loss retained inAOCI (158) (15) (173)

Other comprehensive (income)/loss reclassified to earnings

Interest rate contracts1 36 – 36

Commodity contracts2 (11) – (11)


(134) (15) (149)

Tax impact

Income tax on amounts retained inAOCI 43 – 43

Income tax on amounts reclassified to earnings (6) – (6)

37 – 37

Balance atDecember 31, 2016 (269) 73 (196)

Cash FlowHedges



Balance at January 1, 2015 (81) 8 (73)

Other comprehensive income/(loss) retained inAOCI (128) 80 (48)

Other comprehensive (income)/loss reclassified to earnings



(125) 80 (45)

Tax impact


Income tax on amounts reclassified to earnings – – –

34 – 34



Cash FlowHedges



Balance at January 1, 2014 39 3 42

Other comprehensive income retained inAOCI (159) 5 (154)

Other comprehensive loss reclassified to earnings




(160) 5 (155)

Tax impact


Income tax on amounts reclassified to earnings – – –

40 – 40


1 Reported within Interest expense in the Consolidated Statements of Earnings.2 Reported within Electricity sales revenues in the Consolidated Statements of Earnings.3 Reported within Other income/(expense) in the Consolidated Statements of Earnings

21. Risk Management and Financial InstrumentsMarket Price Risk

EIPLP’s earnings, cash flows and OCI are subject to movements in interest rates, foreign exchangerates and commodity prices (collectively, market price risk). Formal risk management policies, processesand systems have been designed to mitigate these risks.

The following summarizes the types of market price risks to which EIPLP is exposed and the riskmanagement instruments used to mitigate them. EIPLP uses a combination of qualifying and non-qualifyingderivative instruments to manage the risks noted below.

Interest Rate Risk

EIPLP’s earnings, cash flows and OCI are exposed to short term interest rate variability due tothe regular repricing of its variable rate debt, primarily commercial paper. Pay fixed-receive floatinginterest rate swaps are used to hedge against the e�ect of future interest rate movements. EIPLP hasimplemented a program to significantly mitigate the volatility of short-term interest rates on interestexpense with the execution of floating to fixed rate interest rate swaps with an average swap rate of 1.9%.

EIPLP’s earnings, cash flows and OCI are also exposed to variability in longer term interest ratesahead of anticipated fixed rate debt issuances. Forward starting interest rate swaps are used to hedgeagainst the e�ect of future interest rate movements. EIPLP has implemented a program to significantlymitigate its exposure to long-term interest rate variability on select forecast term debt issuanceswith the execution of floating to fixed rate interest rate swaps with an average swap rate of 3.1%.

EIPLP’s portfolio mix of fixed and variable rate debt instruments is managed at the Fund Group level.

Foreign Exchange Risk

EIPLP generates certain revenues, incurs expenses and holds investments and subsidiaries thatare denominated in currencies other than Canadian dollars. As a result, EIPLP’s earnings, cash flowsand OCI are exposed to fluctuations resulting from foreign exchange rate variability.

EIPLP has implemented a policy whereby, at a minimum, it hedges a level of foreign currencydenominated cash flow exposures over a five year forecast horizon. A combination of qualifyingand non-qualifying derivative instruments is used to hedge anticipated foreign currency denominatedrevenues and expenses, and to manage variability in cash flows.


Commodity Price Risk

EIPLP’s earnings, cash flows and OCI are exposed to changes in commodity prices as a result of itsownership interest in certain assets and investments. These commodities primarily consist of crudeoil and power. EIPLP employs financial derivative instruments to fix a portion of the variable priceexposures that arise from physical transactions involving these commodities. EIPLP may use acombination of qualifying and non-qualifying derivative instruments to manage commodity price risk.

Total Derivative Instruments

The following table summarizes the Consolidated Statements of Financial Position location andcarrying value of EIPLP’s derivative instruments. EIPLP did not have any outstanding fair value hedgesas at December 31, 2016 or 2015.

EIPLP generally has a policy of entering into individual International Swaps and Derivatives Association,Inc. agreements, or other similar derivative agreements, with the majority of its derivative counterparties.These agreements provide for the net settlement of derivative instruments outstanding with specificcounterparties in the event of bankruptcy or other significant credit event, and would reduce EIPLP’scredit risk exposure on derivative asset positions outstanding with the counterparties in these particularcircumstances. The following table also summarizes the maximum potential settlement amount in theevent of these specific circumstances. All amounts are presented gross in the Consolidated Statementsof Financial Position.

December 31, 2016


Used as CashFlow Hedges


Instruments



AmountsAvailable

for O�set

Total NetDerivative

Instruments


Accounts receivable andother (Note 8)

Foreign exchange contracts – 5 5 (1) 4

Interest rate contracts 1 – 1 (1) –

Commodity contracts 9 – 9 (6) 3

10 5 151 (8) 7

Deferred amounts andother assets (Note 13)

Foreign exchange contracts 2 – 2 – 2

Commodity contracts 8 – 8 (7) 1

10 – 10 (7) 3

Accounts payable andother (Note 15)

Foreign exchange contracts – (405) (405) 1 (404)

Interest rate contracts (2) – (2) 1 (1)

Commodity contracts – (36) (36) 6 (30)

(2) (441) (443)2 8 (435)

Other long-term liabilities (Note 17)

Foreign exchange contracts – (1,355) (1,355) – (1,355)



(128) (1,519) (1,647) 7 (1,640)

Total net derivative asset/(liability)

Foreign exchange contracts 2 (1,755) (1,753) – (1,753)


Commodity contracts 17 (200) (183) – (183)

(110) (1,955) (2,065) – (2,065)


December 31, 2015


Used as CashFlow Hedges


Instruments



AmountsAvailable

for O�set

Total NetDerivative

Instruments


Accounts receivable andother (Note 8)

Foreign exchange contracts 1 1 2 – 2

Interest rate contracts 1 – 1 (1) –

Commodity contracts 7 9 16 (5) 11

9 10 191 (6) 13

Deferred amounts andother assets (Note 13)

Foreign exchange contracts 2 – 2 – 2

Commodity contracts 6 1 7 (6) 1

8 1 9 (6) 3

Accounts payable andother (Note 15)


Interest rate contracts (86) – (86) 1 (85)


(86) (459) (545)2 6 (539)

Other long-term liabilities (Note 17)

Foreign exchange contracts – (1,860) (1,860) – (1,860)



(77) (2,019) (2,096) 6 (2,090)

Total net derivative asset/(liability)

Foreign exchange contracts 3 (2,289) (2,286) – (2,286)


Commodity contracts 13 (178) (165) – (165)

(146) (2,467) (2,613) – (2,613)

1 Reported within Accounts receivable and other (2016 – $10 million; 2015 – $7 million) and Accounts receivable from a�liates (2016 – $5 million; 2015 – $12 million)on the Consolidated Statements of Financial Position.

2 Reported within Accounts payable and other (2016 – $10 million; 2015 – $87 million) and Accounts payable to a�liates (2016 – $433 million; 2015 – $458 million) on the ConsolidatedStatements of Financial Position

The following table summarizes the maturity and notional principal or quantity outstanding relatedto EIPLP’s derivative instruments.


Interest rate contracts – short-termborrowings (millions of Canadian dollars) 736 1,227 81 25 25 191

Interest rate contracts – long-termdebt (millions of Canadian dollars) – 1,170 200 – – –Foreign exchange contracts –UnitedStates dollar forwards – sell

(millions of United States dollars) 1,859 1,612 1,807 1,826 565 222Foreign exchange contracts –UnitedStates dollar forwards – purchase

(millions of United States dollars) 317 2 2 2 – –

Commodity contracts – power (megawatt hours (MWH)) 40 30 31 35 (3) (43)


Interest rate contracts – short-termborrowings (millions of Canadian dollars) 1,507 1,498 511 36 25 216

Interest rate contracts – long-termdebt (millions ofCanadian dollars) 780 560 610 200 – –

Foreign exchange contracts –UnitedStates dollar forwards – sell(millions of United States dollars) 1,568 1,564 2,008 1,807 1,424 787

Foreign exchange contracts –UnitedStates dollar forwards – purchase(millions of United States dollars) 119 2 2 2 2 –

Commodity contracts – power (MWH) 40 40 30 31 35 (35)


The E�ect of Derivative Instruments on the Statements of Earnings and Comprehensive Income

The following table presents the e�ect of cash flow hedges on EIPLP’s consolidated earningsand consolidated comprehensive income, before the e�ect of income taxes.




Cash flowhedges


Interest rate contracts 17 (38) (174)

Commodity contracts 15 6 11

32 (30) (162)




Commodity contracts3 (11) (7) (2)

4 2 –

Amount of (gains)/loss reclassified fromAOCI to earnings(ine�ective portion and amount excluded from e�ectiveness testing)

Interest rate contracts2 20 – (1)

20 – (1)

1 Reported within Transportation and other services revenues and Other income/(expense) in the Consolidated Statements of Earnings.2 Reported within Interest (income)/expense in the Consolidated Statements of Earnings.3 Reported within Electricity sales revenues and Other income/(expense) in the Consolidated Statements of Earnings.

EIPLP estimates that $9 million of AOCI related to cash flow hedges will be reclassified to earningsin the next 12 months. Actual amounts reclassified to earnings depend on the interest rates, foreignexchange rates and commodity prices in e�ect when derivative contracts that are currently outstandingmature. For all forecasted transactions, the maximum term over which EIPLP is hedging exposuresto the variability of cash flows is 36 months at December 31, 2016.

Non-Qualifying Derivatives

The following table presents the unrealized gains and losses associated with changes in the fair valueof EIPLP’s non-qualifying derivatives.



Foreign exchange contracts1 534 (1,487) (522)

Commodity contracts2 (22) (8) 3

Total unrealized derivative fair value gain/(loss), net 512 (1,495) (519)

1 Reported within Transportation and other services revenues (2016 – $496 million gain; 2015 – $1,382 million loss; 2014 – $495 million loss) and Other income/(expense)(2016 – $38 million gain; 2015 – $105 million loss; 2014 – $27 million loss) in the Consolidated Statements of Earnings.

2 Reported within Transportation and other services revenues (2016 – $5 million loss; 2015 – $9 million loss; 2014 – $13 million gain) and Operating and administrative expense(2016 – $17 million loss; 2015 – $1 million gain; 2014 – $10 million loss) in the Consolidated Statements of Earnings.

Liquidity Risk

Liquidity risk is the risk EIPLP will not be able to meet its financial obligations, including commitments(Note 26) and guarantees (Note 27), as they become due. In order to manage this risk, EIPLP forecastscash requirements over the near and long term to determine whether su�cient funds will be availablewhen required. EIPLP generates cash from operations, commercial paper issuances and creditfacility draws, through the periodic issuance of public term debt and issuance of units to its partners.Additionally, to ensure ongoing liquidity and to mitigate the risk of market disruption, EIPLP maintainsa level of committed bank credit facilities. In addition, to ensure adequate liquidity, EIPLP activelymanages its bank funding sources to optimize pricing and other terms. Additional liquidity, if necessary,is expected to be available through intercompany transactions with Enbridge or other relatedentities. EIPLP is in compliance with all terms and conditions of its committed credit facilitiesas at December 31, 2016. As a result, all credit facilities are available to EIPLP and the banksare obliged to fund and have been funding EIPLP under the terms of the credit facilities.


Credit Risk

Entering into derivative financial instruments may result in exposure to credit risk. Credit risk arises fromthe possibility that a counterparty will default on its contractual obligations. In order to mitigate this risk,EIPLP enters into risk management transactions primarily with institutions that possess investment gradecredit ratings. Credit risk relating to derivative counterparties is mitigated by credit exposure limits andcontractual requirements, frequent assessment of counterparty credit ratings and netting arrangements.

EIPLP had group credit concentrations and maximum credit exposure, with respect to derivativeinstruments, in the following counterparty segments:

December 31, 2016 2015


Canadian financial institutions 1 1

UnitedStates financial institutions 1 –

European financial institutions 2 1

Other1 5 15

9 17

1 Other is comprised of primarily Enbridge and its a�liates.

Derivative assets are adjusted for non-performance risk of EIPLP’s counterparties using their credit defaultswap spread rates, and are reflected in the fair value. For derivative liabilities, EIPLP’s non-performancerisk is considered in the valuation.

Credit risk also arises from trade and other long-term receivables, and is mitigated through creditexposure limits, contractual requirements, assessment of credit ratings and netting arrangements.Generally, EIPLP classifies and provides for receivables older than 30 days as past due. The maximumexposure to credit risk related to non-derivative financial assets is their carrying value.


EIPLP’s financial assets and liabilities measured at fair value on a recurring basis include derivativeinstruments. EIPLP also discloses the fair value of other financial instruments not measured at fair value.The fair value of financial instruments reflects EIPLP’s best estimates of market value based on generallyaccepted valuation techniques or models and are supported by observable market prices and rates.When such values are not available, EIPLP uses discounted cash flow analysis from applicable yieldcurves based on observable market inputs to estimate fair value.


EIPLP categorizes its financial instruments measured at fair value into one of three di�erent levelsdepending on the observability of the inputs employed in the measurement.

Level 1

Level 1 includes derivatives measured at fair value based on unadjusted quoted prices for identicalassets and liabilities in active markets that are accessible at the measurement date. An active market fora derivative is considered to be a market where transactions occur with su�cient frequency and volumeto provide pricing information on an ongoing basis. EIPLP does not have any financial instruments valuedusing Level 1 inputs.

Level 2

Level 2 includes derivative valuations determined using directly or indirectly observable inputs otherthan quoted prices included within Level 1. Derivatives in this category are valued using models or otherindustry standard valuation techniques derived from observable market data. Such valuation techniquesinclude inputs such as quoted forward prices, time value, volatility factors and broker quotes that canbe observed or corroborated in the market for the entire duration of the derivative. Derivatives valuedusing Level 2 inputs include non-exchange traded derivatives such as over-the-counter foreignexchange forward contracts and interest rate swaps for which observable inputs can be obtained.

EIPLP has also categorized the fair value of its investment in a�liated company and long-termdebt as Level 2. The fair value is based on quoted market prices for instruments of similar yield,credit risk and tenor.


Level 3

Level 3 includes derivative valuations based on inputs which are less observable, unavailable or wherethe observable data does not support a significant portion of the derivatives’ fair value. Generally, Level 3derivatives are longer dated transactions, occur in less active markets, occur at locations where pricinginformation is not available or have no binding broker quote to support Level 2 classification. EIPLP hasdeveloped methodologies, benchmarked against industry standards, to determine fair value for thesederivatives based on extrapolation of observable future prices and rates. Derivatives valued using Level 3inputs include long-dated derivative power contracts, basis swaps, commodity swaps, power and energyswaps, options and long-dated commodity derivative contracts.

EIPLP uses the most observable inputs available to estimate the fair value of its derivatives. When possible,EIPLP estimates the fair value of its derivatives based on quoted market prices. If quoted market pricesare not available, EIPLP uses estimates from third party brokers. For non-exchange traded derivativesclassified in Levels 2 and 3, EIPLP uses standard valuation techniques to calculate the estimated fairvalue. These methods include discounted cash flows for forwards and swaps and Black-Scholes-Mertonpricing models for options. Depending on the type of derivative and nature of the underlying risk, EIPLPuses observable market prices (interest, foreign exchange and commodity) and volatility as primaryinputs to these valuation techniques. Finally, EIPLP considers its own credit default swap spread aswell as the credit default swap spreads associated with its counterparties in its estimation of fair value.

Fair Value of Derivatives

EIPLP has categorized its derivative assets and liabilities measured at fair value as follows:



Instruments


Financial assets

Current derivative assets

Foreign exchange contracts – 5 – 5

Interest rate contracts – 1 – 1

Commodity contracts – – 9 9

– 6 9 15

Long-termderivative assets



– 2 8 10


Current derivative liabilities

Foreign exchange contracts – (405) – (405)

Interest rate contracts – (2) – (2)

Commodity contracts – (2) (34) (36)

– (409) (34) (443)

Long-termderivative liabilities

Foreign exchange contracts – (1,355) – (1,355)


Commodity contracts – – (164) (164)

– (1,483) (164) (1,647)

Total net financial asset/(liability)



Commodity contracts – (2) (181) (183)

– (1,884) (181) (2,065)




Instruments


Financial assets

Current derivative assets


Interest rate contracts – 1 – 1

Commodity contracts – 8 8 16

– 11 8 19

Long-termderivative assets



– 2 7 9


Current derivative liabilities

Foreign exchange contracts – (430) – (430)



– (516) (29) (545)

Long-termderivative liabilities




– (1,937) (159) (2,096)

Total net financial asset/(liability)



Commodity contracts – 8 (173) (165)

– (2,440) (173) (2,613)

The significant unobservable inputs used in fair value measurement of Level 3 derivative instrumentswere as follows:

December 31, 2016 Fair ValueUnobservable

InputMinimum

PriceMaximum

PriceWeighted

Average PriceUnit of

Measurement

(fair value in millions of Canadian dollars)

Commodity contracts – financial1

Power (181) Forward power price 26.00 78.70 48.32 $/MWH

1 Financial forward commodity contracts are valued using a market approach valuation technique.

If adjusted, the significant unobservable input disclosed in the table above would have a direct impacton the fair value of EIPLP’s Level 3 derivative instruments. The significant unobservable input usedin the fair value measurement of Level 3 derivative instruments is forward commodity prices. Changes inforward commodity prices could result in significantly di�erent fair values for EIPLP’s Level 3 derivatives.


Changes in net fair value of derivative assets and liabilities classified as Level 3 in the fair value hierarchywere as follows:



Level 3 net derivative liability at beginning of year (173) (173)

Total gains/(loss), unrealized

Included in earnings1 (14) (1)

Included inOCI 3 (1)

Settlements 3 2

Level 3 net derivative liability at endof year (181) (173)

1 Reported within Transportation and other services revenues, Commodity costs and Operating and administrative expense in the Consolidated Statements of Earnings.

EIPLP’s policy is to recognize transfers as of the last day of the reporting period. There were no transfersbetween levels as at December 31, 2016 and 2015.

Fair Value of Other Financial Instruments

At December 31, 2016, EIPLP’s long-term debt had a carrying value of $6,078 million (2015 – $5,605 million)before debt issuance costs and a fair value of $6,549 million (2015 – $5,833 million).

At December 31, 2016, EPI, a subsidiary of EIPLP, had an investment of $514 million (2015 – $514 million)in non-voting, redeemable Series A Preferred Shares in EESCI (Note 25). EIPLP has classified thisinvestment in a�liated company as available-for-sale debt security and carries it at fair value, withchanges in fair value recorded in OCI. As at December 31, 2016, the fair value of this investmentapproximates its cost and redemption value.

EIPLP holds Class A Units of SL Holdings LLC, which is an indirect wholly-owned subsidiary of Enbridge,providing defined, scheduled and fixed distributions that represent the equity cash flows derived fromthe core rate base of Southern Lights US until June 30, 2040. At December 31, 2016, EIPLP’s investmenthad a carrying value of $801 million (2015 – $844 million) included in Long-term receivable from a�liateand Accounts receivable from a�liates on the Consolidated Statements of Financial Position and a fairvalue of $756 million (2015 – $820 million).

22. Income TaxesIncome Tax Rate Reconciliation



Earnings before income taxes 2,704 121 626

Federal statutory income tax rate 15% 15% 15%

Expected federal taxes at statutory rate 406 18 94

Increase/(decrease) resulting from:

Provincial and state income taxes 155 (76) (55)

Foreign andother statutory rate di�erentials 22 23 19

E�ects of rate-regulated accounting1 (91) (29) (72)

Part VI.1 tax, net of federal Part I deduction 13 54 47

Deductible dividends (6) (2) (10)

Unremitted foreign subsidiary earnings 3 4 –

Earnings in non-taxable entities (42) (38) (24)

Non-taxable portion of gain on sale of investment to unrelated party2 (61) – –

Non-taxable portion of capital gains and losses 2 (12) –

Intercompany sale of investments3 6 – –

Other – (1) (4)

Income taxes (recovery)/expenseonearnings 407 (59) (5)

E�ective income tax rate 15.1% (48.8%) (0.8%)

1 The increase in 2016 is due to the tax e�ect of the 2015 impairment of certain regulatory receivables.2 The amount in 2016 represents the federal component of the non-taxable portion of the gain on the sale of the South Prairie Region assets to unrelated party.3 In November 2016, EIPLP sold certain assets to entities under common control. The intercompany gains realized on these transfers were eliminated. However, because these

transactions involved the sale of partnership units, tax consequences have been recognized in earnings.


Components of Pretax Earnings and Income Taxes



Earnings before income taxes

Canada 2,594 4 563

UnitedStates 110 117 63

2,704 121 626

Current income taxes (recovery)/expense

Canada 29 154 13


39 155 36

Deferred income taxes (recovery)/expense

Canada 332 (253) (56)


368 (214) (41)

Income taxes (recovery)/expenseonearnings 407 (59) (5)

Components of Deferred Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences of di�erences betweencarrying amounts of assets and liabilities and their respective tax bases. Major components of deferredincome tax assets and liabilities are as follows:

December 31, 2016 2015


Deferred income tax liabilities

Property, plant and equipment (1,640) (1,352)

Investments (348) (275)

Regulatory assets (332) (272)

Deferred revenue (71) (103)

Other (6) (5)

Total deferred income tax liabilities (2,397) (2,007)

Deferred income tax assets

Financial instruments 600 688

Asset retirement obligations 28 29

Loss carryforwards 186 273

Other 11 13

Total deferred income tax assets 825 1,003

Net deferred income tax liabilities (1,572) (1,004)

Presented as follows:1

Accounts receivable andother (Note 8) – 40

Deferred income taxes 202 246

Total deferred income tax assets 202 286

Accounts payable andother – (15)

Deferred income taxes (1,774) (1,275)

Total deferred income tax liabilities (1,774) (1,290)

Net deferred income tax liabilities (1,572) (1,004)

1 E�ective January 1, 2016, EIPLP elected to early adopt ASU 2015-17 (Note 3).


As at December 31, 2016, EIPLP recognized the benefit of unused tax loss carry forwards of $690 million(2015 – $1,014 million) in Canada which expire in 2031 to 2036.

EIPLP and its subsidiaries are subject to taxation in Canada and the United States. The materialjurisdictions in which EIPLP is subject to potential examinations are within Canada (Federal, Alberta,Ontario and Quebec) and the United States (Federal, Illinois, Iowa, Minnesota, North Dakota andWisconsin). EIPLP is open to examination by certain Canadian tax authorities for the 2008 to 2016 taxyears and by certain United States tax authorities for the 2014 and 2016 tax years. EIPLP is currentlyunder examination for income tax matters in Canada for the 2013 and 2014 taxation years.

Unrecognized Tax Benefits

EIPLP has no unrecognized tax benefits related to uncertain tax positions as at December 31, 2016and no accrued interest or penalties thereon.

23. Other IncomeYear endedDecember 31, 2016 2015 2014


Net foreign currency gain/(loss) (17) 33 24

Allowance for equity funds usedduring construction – – 2

Interest incomeon a�liate loans (Note 25) 102 83 97

Interest income – (2) (3)

Gains ondispositions (Note 7) 850 22 –

Other (6) (3) 3

929 133 123

24. Changes in Operating Assets and LiabilitiesYear endedDecember 31, 2016 2015 2014


Accounts receivable andother 18 (63) 159

Accounts receivable froma�liates (2) (6) (15)

Deferred amounts andother assets (13) 111 (169)

Accounts payable andother (106) (378) (196)

Accounts payable to a�liates 40 379 83

Interest payable 11 8 (1)

Other long-term liabilities (88) (3) 191

(140) 48 52


25. Related Party TransactionsAll related party transactions are entered into in the normalcourse of business and, unless otherwise noted, are measuredat the exchange amount, which is the amount of considerationestablished and agreed to by the related parties. A�liates referto Enbridge and companies that are either directly or indirectlyowned by Enbridge.

The acquisition of the Purchased Entities in the 2015 Transactionand equity investment in Alliance Pipeline US in the 2014 Transactionwere accounted for as transactions among entities under commoncontrol. See Notes 6 and 10, respectively, for additional disclosure.

General Partner

Enbridge Income Partners GP Inc. (EIPGP), a subsidiary ofEnbridge, is the general partner of EIPLP and owns 0.01%of the Class A units of EIPLP. As at December 31, 2016,Enbridge holds a 51% direct interest in EIPGP. Per EIPLP’spartnership agreement, EIPGP has the right to manage, controland operate the businesses of EIPLP. EIPGP delegates theexecution of certain of its powers to the Manager, a wholly-ownedsubsidiary of Enbridge.

Intercorporate Services

On August 2, 2015 all Canadian employees of EPI and EPAIwere transferred to an a�liated company which assumedall employment related obligations, commitments and liabilities.The related net pension and other post-employment benefitliabilities, as well as the related unamortized losses recordedin AOCI, were not included in the retrospective consolidatedfinancial statements as EIPLP has elected to recognize requiredcontributions for the period as net pension costs withoutreflecting related plan benefit obligations and plan assets.

Pension related costs of $45 million for the year endedDecember 31, 2015 (2014 – $48 million) were recorded inOperating and administrative expense on the ConsolidatedStatements of Earnings.

As at December 31, 2016, EIPLP and its subsidiaries do not haveany employees and receives services from a�liates for managingand operating the business. These services, which are charged atcost in accordance with service agreements or which reflect normalcommercial trade terms, totalled $445 million for the year endedDecember 31, 2016 (2015 – $234 million; 2014 – $90 million).

EIPLP provides certain operational services to a�liates.These services, which are charged at cost in accordance withservice agreements or which reflect normal commercial tradeterms, totalled $15 million for the year ended December 31, 2016(2015 – $166 million; 2014 – $214 million).

Liquids Pipelines

EIPLP has contracts with shippers who are also a�liatesof EIPLP through common ownership interests of Enbridge.Revenues from a�liates, which reflect normal commercial tradeterms, totalled $52 million for the year ended December 31, 2016(2015 – $78 million; 2014 – $51 million).

Gas Pipelines

Alliance Pipeline has contracts with shippers that are also a�liatesof EIPLP through common ownership interests of Enbridge. EIPLP’sshare of Alliance Pipeline’s revenues from a�liates for the yearended December 31, 2016 was $134 million (2015 – $59 million;2014 – $50 million).

Long-Term Receivable from A�liate

Long-term receivable from a�liate includes the carrying valueof Class A Units of SL Holdings LLC, which is an indirect wholly-owned subsidiary of Enbridge. As at December 31, 2016, $782 million(2015 – $826 million) is included in Long-term receivable from a�liateand $19 million (2015 – $18 million) is included in Accounts receivablefrom a�liates. Interest income of $62 million for the year endedDecember 31, 2016 (2015 – $61 million; 2014 – $5 million), has beenrecorded within Other income – a�liates on the ConsolidatedStatements of Earnings.

Investment in A�liated Company

As at December 31, 2016, EIPLP had an investment of $514 million(2015 – $514 million) in 500,000 non-voting, redeemable Series APreferred Shares of EESCI (Note 21). These Preferred Sharesentitle EIPLP to receive annual dividends through 2021. EESCIhas the option to redeem the outstanding Preferred Shares at anytime. EIPLP is also entitled to require redemption of these PreferredShares at any time. Dividend income of $40 million was recognizedin Other income – a�liates for the year ended December 31, 2016(2015 – $14 million; 2014 – nil).

During the year ended December 31, 2015, a subsidiary of Enbridgeexercised its option to redeem the $160 million in 160,000 non-voting,redeemable preference shares that were held as an investment byEPAI, a subsidiary of EIPLP. The investment was acquired in 2015and entitled EPAI to receive a minimum cumulative quarterly dividendequal to 106.25% of the cost of funds incurred by EPAI to finance itsacquisition of these preference shares. Dividend income of $4 millionwas recognized in Other income – a�liates for the year endedDecember 31, 2015 (2014 – $12 million).

During the year ended December 31, 2014, Enbridge EnergyDistribution Inc. (EEDI) exercised its option to redeem the$2,690 million in 2.69 million non-voting, redeemable, retractablepreference shares of EEDI that were held as an investment by EPI,a subsidiary of EIPLP. The investment was acquired in 2013and entitled EPI to receive a cumulative quarterly dividendequal to 106.25% of the cost of funds incurred by EPI to financeits acquisition of these preference shares.


Intercorporate Loans and Balances

Loan to A�liate

The following loan to a�liate is evidenced by a formal loan agreement.

2016 2015


WeightedAverage


WeightedAverage




Current portion of loan to a�liate (3) (3)

– –

Loans from A�liates

The following loans from a�liates are evidenced by formal loan agreements:

2016 2015


WeightedAverage


WeightedAverage



Enbridge 4.5% 4,191 4.6% 4,191

Enbridge 2025 4.0% 124 4.0% 124

Enbridge Current 0.0% 134 – –


A�liate Current 2.0% 229 – –

A�liate 2020 7.1% 100 7.1% 100

A�liate 2045 4.0% 734 4.0% 734

A�liate 2045 4.0% 652 4.0% 652

A�liate – – – 1.9% 47

6,242 5,896

Current portion of loans froma�liates (441) (95)

5,801 5,801

Loans from a�liates’ maturities are $441 million for the year ended December 31, 2017; nil forthe years ending December 31, 2018 and 2019, respectively; and $600 million for each of the yearsending December 31, 2020 and December 31, 2021. These loans are subordinate to senior, unsecureddebt. The a�liate loan interest obligations are $242 million, $254 million, $254 million, $239 millionand $210 million for each of the years ending December 31, 2017 through 2021.

As at December 31, 2016, EIPLP had a net hedge payable balance of $2,023 million (2015 – $2,501 millionnet payable) to a�liates in respect of derivative instruments that the a�liates entered into on EIPLP’sbehalf. These amounts are recorded in Accounts receivable from a�liates, Deferred amounts and otherassets, Accounts payable to a�liates and Other long-term liabilities on the Consolidated Statementsof Financial Position.

2020 – 2064


26. Commitments and ContingenciesAt December 31, 2016, EIPLP had commitments as detailed below:

TotalLess than

1 year 2 years 3 years 4 years 5 years Thereafter


Purchaseof services, pipe andothermaterials, including transportation1 773 604 108 34 11 5 11

Capital andoperating leases 19 5 4 3 2 1 4

Maintenance agreements 96 22 13 7 6 4 44

Land lease commitments 95 5 6 6 6 6 66

Total 983 636 131 50 25 16 125

1 Includes capital and operating commitments.

Other Litigation

EIPLP and its subsidiaries are subject to various other legal and regulatory actions and proceedingswhich arise in the normal course of business, including interventions in regulatory proceedings andchallenges to regulatory approvals and permits by special interest groups. While the final outcomeof such actions and proceedings cannot be predicted with certainty, the Manager believes that theresolution of such actions and proceedings will not have a material impact on EIPLP’s consolidatedfinancial position or results of operations.

27. GuaranteesIn the normal course of conducting business, EIPLP enters into agreements that involve providing certainguarantees for a�liates. EIPLP has guaranteed obligations of the Fund under the Fund’s unsecuredcredit facility of $1,500 million (2015 – $1,500 million) which mature in 2019 and medium-term notes whichmature from 2017 to 2044. As at December 31, 2016, $11 million (2015 – $11 million) was issued in lettersof credit and $225 million (2015 – nil) was drawn on the credit facilities and there was $2,075 million(2015 – $2,405 million) outstanding on the notes. No amounts have been accrued for these guaranteesas it is not currently likely EIPLP will have to pay any amounts with respect to these guarantees.


Glossary

ACFFO Available cash flow from operations

Adjusted EBIT EBIT adjusted for unusual,non-recurring or non-operating factors

Alliance Pipeline Canada The Canadian portionof the Alliance Pipeline

Alliance Pipeline US The United States portionof the Alliance Pipeline

bpd Barrels per day

Canadian L3R Program Canadian portion of the Line 3Replacement Program

CTS Competitive Toll Settlement

DRIP Dividend Reinvestmentand Share Purchase Plan

EBIT Earnings before interestand income taxes

ECT Enbridge Commercial Trust

EIPLP Enbridge Income Partners LP

Enbridge Enbridge Inc.

ENF or the Company Enbridge Income Fund Holdings Inc.

EPAI Enbridge Pipelines (Athabasca) Inc.

EPI Enbridge Pipelines Inc.

Fund Units Ordinary trust units of the Fund

IDR Incentive Distribution Right

IFRS International FinancialReporting Standards

IJT International Joint Tari�

MD&A Management’s Discussion and Analysis

MTN Medium-term note

MW Megawatts

NEB National Energy Board

NGL Natural gas liquids

OCI Other comprehensive income

ORM Plan Operational Risk Management Plan

PPA(s) Power purchase agreement(s)

SIR Special Interest Rights

Southern Lights The Canadian portion of SouthernCanada Lights Pipeline Southern Lights

Southern Lights Class A units of certain EnbridgeClass A Units subsidiaries which provide a defined cash

flow stream from Southern Lights US

Southern Lights US The United States portionof Southern Lights

the Fund Enbridge Income Fund

the Fund Group The Fund, ECT, EIPLP andthe subsidiaries and investees of EIPLP

the Manager or EMSI Enbridge Management Services Inc.

TPDR Temporary PerformanceDistribution Right

U.S. GAAP Generally accepted accounting principlesin the United States of America

VIE Variable interest entity

WCSB Western Canadian Sedimentary Basin

Shareholder Information

If you have inquiries regarding thefollowing:

• additional financial information

• industry and company developments

• latest news releases or investorpresentations

• any other investment-related inquiries

please contact Enbridge InvestorRelations toll-free at 866-859-5957 or [email protected]; or visitthe Enbridge Income Fund Holdings Inc.website at enbridgeincomefund.com

Executive O�ce

Enbridge Income Fund Holdings Inc.200, 425 – 1st Street S.W.Calgary, Alberta, T2P 3L8CanadaTelephone: 403-231-3900

Manager

Enbridge Management Services Inc.200, 425 – 1st Street S.W.Calgary, Alberta, T2P 3L8CanadaTelephone: 403-231-3900Facsimile: 403-231-3920

Stock Exchange

The common shares of Enbridge IncomeFund Holdings Inc. are listed in Canada onthe Toronto Stock Exchange and tradeunder the symbol “ENF”.

Registrar and Transfer Agent

CST Trust Company600, 333 – 7th Avenue S.W.Calgary, Alberta, T2P 2Z1Canada

Auditors

PricewaterhouseCoopers LLP

Qualifications for Registered Plans

Common Shares are qualified investments for registered retirementsavings plans, registered retirement income funds, deferred profitsharing plans and registered education savings plans.

Dividends paid on the Common Shares will generally be designatedas eligible dividends, pursuant to subsection 89(14) of the IncomeTax Act. An eligible dividend paid to a Canadian resident is entitledto the enhanced dividend tax credit.

Monthly Cash Dividends

In January 2017, ENF increased its monthly dividend by 10 percentto $0.1711 per share. Monthly dividend amounts will be announcedas declared by the Board of Directors, and are generally paidmid-month to shareholders of record at the end of each month.Detailed monthly record and payment dates are available at


of the Fund Group's business and assets; long-term outlook; future performanceand results; results of operations, revenues, cash flows and ACFFO; future transactionswith Enbridge Inc. and their anticipated impact; utilization, performance and quality of theFund's assets, constraints on pipelines, the cost and completion of secured growth projects;completion of facilities/projects; access to debt and capital markets; liquidity and capitalrequirements, market conditions, exposure to commodity, interest and foreign exchangerates; exposure to risks relating to throughput, contract risk, supply and demand for oil,gas and natural gas liquids, creditworthiness of customers, ability to fund secured growthprogram; stability and competitiveness of tolls, competition, government and regulatoryapprovals, customer requirements and expectations, ability to maintain a reliable andlow-risk business model; distributions of the Fund; dividends, dividend increases anddividend growth; and increases in shareholder value and shareholder return. By its naturethis information applies certain assumptions and expectations about future outcomes,including without limitation, oil supply outlook and pipeline capacity, economics of oilsands growth projects, demand for market access, future market and economic conditions,exposure to fluctuating energy prices, wind and solar resources, regulatory approvals,credit worthiness of customers and demand for the Fund Group's service o�erings,so we remind you it is subject to risks and uncertainties that a�ect every business,including ours. The more significant factors and risks that might a�ect future outcomesare listed and discussed in the risks sections of the Fund's and ENF's public disclosurefilings, including Management's Discussion and Analysis and Annual Information Forms,available on SEDAR at www.sedar.com

Enbridge is committed to reducing its impact on theenvironment in every way, including the production ofthis publication. This report was printed entirely on FSC®Certified paper containing post-consumer waste fiberand is manufactured using biogas energy.

Corporate Information

Facsimile: 403-231-3920

Telephone: 800-387-0825, or416-682-3860 outside of North Americacanstockta.com

This Annual Report includes forward-looking information relating to: future growth

enbridgeincomefund.com/dividendhistory

DividendReinvestmentandSharePurchasePlan

ENF maintains a Dividend Reinvestment and Share PurchasePlan (DRIP) through which eligible shareholders can automaticallyreinvest cash dividends into additional ENF shares at a two-percentdiscount to the market price. DRIP participants are also eligible topurchase up to an additional $20,000 in ENF shares withoutincurring brokerage fees. For more information on the DRIP andhow to enroll, please contact CST, the DRIP agent or yourinvestment dealer.

Company Snapshot1

1 As at December 31, 2016, except where noted.

2 Equity capitalization includes the market value of the Fund Group’s equity outstanding,calculated using the closing December 31, 2016 share price for ENF common shares.The Fund Group’s equity outstanding includes Enbridge Commercial Trust’s preferredunits, Enbridge Income Fund ordinary units and Enbridge Income Partners LP Class Cand D units.

3 Enterprise value reflects the Fund Group’s total value, calculated as the sum of equitycapitalization and the Fund Group’s long-term debt, less the cash and cash equivalentsbalances at December 31, 2016.

4 As at March 1, 2017.

5 Eligible shareholders can automatically reinvest cash dividends into additional ENF sharesat a two-percent discount to the market price.

Ticker Symbol TSX:ENF

Public Market Capitalization

$4.3B $26B

Dividend Reinvestment Plan (DRIP)5

2% Discount5-year Dividend CAGR (2011 – 2016)

9.9%

2017 Annualized Dividend Per Share

$2.05

Fund Group Enterprise Value3

$41BFund Group Equity Capitalization2

Dividend Frequency

MonthlyDividend Yield4

~6%

Strong Total Shareholder Return1

ENF is a premier Canadian energy infrastructureinvestment vehicle for investors looking forpredictable and growing dividend income.

ACompelling Investment

It’s easy to invest in Enbridge Income FundHoldings Inc. ENF’s common shares aretraded on the TSX. ENF’s public float hasgrown significantly over the past few years.When you combine ENF’s healthy yieldwith our anticipated near-term dividendgrowth and increasing trading liquidity,we believe ENF o�ers a very compellingvalue proposition to risk-averse, yield-oriented investors.

1 Total shareholder return inclusive of share price appreciation, assuming dividends are reinvested.Chart represents data from January 1, 2007 to December 31, 2016.

2 Compound Annual Growth Rate of an investment over a

Over the past 10 years, ENF has achieved a total shareholder return of 18 percent on an

annualized basis, outpacing the broader Canadian index. We expect to continue delivering

strong, predictable returns to our investors well into the future.

400%

200%

300%

500%

100%

2007 2008 2009 2010 2011 2012 2013

18.0% CAGR2

4.7% CAGR2

2014 2015 2016

ENF

S&P/TSX Composite Index

200, 425 – 1st Street S.W.Calgary, Alberta, T2P 3L8Canada

Telephone: 403-231-3900Facsimile: 403-231-3920Toll free: 866-859-5957

enbridgeincomefund.com

10-year time period.

Enbridge Income Fund Holdings Inc. 2016 Annual Report/media/Income Fund...net generating capacity...

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