Enbridge Income Fund
TSX : ENF.UN

Enbridge Income Fund

November 05, 2007 19:28 ET

Enbridge Income Fund Announces Quarterly Results

CALGARY, ALBERTA--(Marketwire - Nov. 5, 2007) - Enbridge Income Fund (TSX:ENF.UN) (the Fund) today announced earnings of $3.8 million, or $0.11 per unit, for the three months ended September 30, 2007 compared with $5.8 million or $0.17 per unit during the same period in the prior year. Earnings decreased due to increased costs in the Corporate segment, which were partially offset by a solid contribution from Alliance Canada and the Saskatchewan System. The Fund's earnings for the nine months ended September 30, 2007 of $10.3 million are lower than the prior year comparative period by $21.8 million. This decrease in earnings is primarily attributed to the revaluation of future income taxes in 2006 and future income taxes recognized in 2007 as a result of new tax legislation substantially enacted in the second quarter of 2007.

For the three and nine months ended September 30, 2007, cash flow provided by operating activities was $30.6 million (2006 - $35.4 million) and $71.1 million (2006 - $73.0 million), respectively, while cash distributions paid to ordinary and subordinated unitholders were $8.3 million (2006 - $8.0 million) and $24.9 million (2006 - $23.9 million), respectively.

Jim Schultz, President of Enbridge Management Services Inc., the Administrator of the Fund, commented, "Alliance Canada and the Saskatchewan System continued to generate stable and sustainable distributions to the unitholders. We continue to focus our efforts on our key expansion projects. Specifically, construction is expected to begin on the Westspur expansion in the Saskatchewan System in November and brought in service in Q2 2008. The Alliance Canada BCX expansion is expected to commence construction in spring of 2008. Additionally, construction of three new waste heat facilities within NRGreen continues to progress and it is expected that the Fund will benefit from increased earnings from these facilities beginning in Q2 2008."

During the nine months ended September 30, 2007, the Fund declared monthly cash distributions of $0.08 per ordinary unit. Cash distributions of the same amount per unit were also declared on the subordinated units and the ECT preferred units. The Fund pays cash distributions on a monthly basis to unitholders of record on the last business day of each month. Distributions are payable on or about the 15th day of the month following the declaration.

Based on current operations, the Fund estimates that approximately 80% of cash to be distributed in 2007 will be included in the income of unitholders for tax purposes. The remaining 20% of cash distributed to unitholders represents non-taxable return of capital.

FORWARD LOOKING INFORMATION

In the interest of providing the Fund's unitholders and potential investors with information about the Fund and its subsidiaries, including management's assessment of the Fund's and its subsidiaries' future plans and operations, certain information provided in this News Release constitutes forward-looking statements or information (collectively, "forward-looking statements"). Forward-looking statements are typically identified by words such as "anticipate", "expect", "project", "estimate", "forecast", "plan", "intend", "target", "believe" and similar words suggesting future outcomes or statements regarding an outlook. Although the Fund believes that these forward-looking statements are reasonable based on the information available on the date such statements are made, such statements are not guarantees of future performance and readers are cautioned against placing undue reliance on forward-looking statements. By their nature, these statements involve a variety of assumptions, known and unknown risks and uncertainties and other factors, which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied by such statements.

The Fund's forward-looking statements are subject to risks and uncertainties pertaining to operating performance, regulatory parameters, weather, economic conditions and commodity prices, including but not limited to those risks and uncertainties discussed in this News Release and in the Fund's other filings with Canadian securities regulators. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these are interdependent and the Fund's future course of action depends on management's assessment of all information available at the relevant time. Except to the extent required by law, the Fund assumes no obligation to publicly update or revise any forward-looking statements made in this News Release or otherwise, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements, whether written or oral, attributable to the Fund or persons acting on the Fund's behalf, are expressly qualified in their entirety by these cautionary statements.

NON-GAAP MEASURES

This News Release contains references to cash available for distribution and earnings before impact from tax changes. Cash available for distribution represents cash available to fund distributions on ordinary units, subordinated units and ECT preferred units, as well as for debt repayments and reserves. This measure is important to unitholders as the Fund's objective is to provide a stable and sustainable flow of distributable cash to unitholders. Please refer to Cash Available for Distribution reconciliation on page 5. Earnings before impact from tax changes represents earnings adjusted for tax changes substantively enacted. Management believes that the presentation of earnings before impact from tax changes provides useful information to investors and unitholders as it provides increased predictive value. Cash available for distribution and earnings before impact from tax changes are not measures that have standardized meanings prescribed by Canadian Generally Accepted Accounting Principles (GAAP) and are not considered GAAP measures. Therefore, these measures may not be comparable with similar measures presented by other issuers.



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SELECTED OPERATING AND FINANCIAL HIGHLIGHTS(1)
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Three months ended Nine months ended
September 30, September 30,
------------------------------------------
(millions of dollars except where
otherwise noted) 2007 2006 2007 2006
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Average Daily Throughput Volume
Alliance Canada (millions of cubic
feet per day) 1,535 1,513 1,606 1,595
Saskatchewan System(2) (thousands
of barrels per day)
Westspur System 158.6 155.5 157.0 154.4
Saskatchewan Gathering System 109.0 103.1 108.2 103.1
Weyburn System 37.3 39.1 34.8 38.1
Virden System 23.1 18.4 22.4 20.8
Green Power(3) (thousands of mega
watt hours produced) 50.2 - 200.7 -

Revenues 65.0 60.8 197.8 186.2

Earnings before impact from tax
changes(4) 3.8 5.8 11.3 15.4
Earnings 3.8 5.8 10.3 32.1
Per Unit (dollars per unit) 0.11 0.17 0.30 0.93

Cash Available for Distribution4 19.0 17.9 55.7 58.0
Cash Distributions Declared 17.4 16.7 52.3 50.1

Cash Distributions Declared Per Unit
(dollars per unit)
Ordinary Units 0.2400 0.2298 0.7200 0.6893
Subordinated Units 0.2400 0.2298 0.7200 0.6893
ECT Preferred Units 0.2400 0.2298 0.7200 0.6893

Total Long-Term Liabilities 1,517.4 1,455.0

Total Assets 1,866.8 1,825.2

ECT Preferred Units (number of
units) 38,023,750 38,023,750

Ordinary Units (number of units) 20,125,000 20,125,000
Subordinated Units (number of units) 14,500,000 14,500,000
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Total Number of Units 34,625,000 34,625,000
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(1) Financial Highlights have been extracted from financial statements
prepared in accordance with Canadian Generally Accepted Accounting
Principles.
(2) Totals are not presented as the same volumes can be transported through
a combination of the pipelines comprising the Saskatchewan System.
(3) Wind assets were acquired on October 1, 2006. NRGreen's Kerrobert waste
heat recovery facility began operations December 29, 2006.
(4) See Non-GAAP Measures.


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CONSOLIDATED EARNINGS
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Three months ended Nine months ended
September 30, September 30,
------------------------------------------
(millions of dollars) 2007 2006 2007 2006
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Alliance Canada 14.1 15.2 42.6 43.1
Saskatchewan System 3.0 3.2 9.1 9.2
Green Power - - 1.5 -
Corporate (13.3) (12.6) (41.9) (36.9)
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Earnings before impact from tax changes 3.8 5.8 11.3 15.4
Revalue future taxes due to tax rate
changes - - 0.9 16.7
Future taxes due to Tax Fairness Plan - - (1.9) -
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Earnings 3.8 5.8 10.3 32.1
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- Alliance Canada earnings decreased due to the reduction in the equity return caused by the depreciating investment base.

- The Saskatchewan System earnings were consistent with the comparable prior year periods.

- Green Power earnings for the three months ended September 30, 2007 were reflective of extreme weather in the quarter. Earnings from the wind power projects were lower than previous quarters as a result of lower wind volumes. For NRGreen, the extreme hot weather reduced the waste heat output from the Alliance Canada gas turbines from which power is produced, resulting in lower earnings compared with prior quarters.

- The increase in Corporate costs for both the three and nine months ended September 30, 2007 was driven by:

-- an increase in interest expense as a result of increased borrowings to finance the acquisition of the Wind Power projects in October 2006 and other expansion projects; and

-- higher incentive fees and ECT preferred unit distributions due to a 4.5% increase in per unit distributions in the fourth quarter of 2006.

- Corporate costs for the three months period were positively impacted by current tax recoveries due to tax losses from interest deductions on inter-corporate debt. These losses will be carried back to offset taxes paid in prior years.

- On June 22, 2007, the "Tax Fairness Plan", which introduced Bill C-52 (the income trust taxation legislation), received Royal Assent. Under the enacted legislation, a distribution tax of 31.5% will be imposed on Enbridge Income Fund starting in 2011. This change resulted in the recognition of future income tax liabilities and expense of $1.9 million. The impact of the Tax Fairness Plan on the Fund's reported earnings was relatively small because most of the assets are rate regulated and future taxes are expected to be included in the approved rates charged to customers in the future. However, as enacted in its present form, the Tax Fairness Plan will, all other things being equal, likely result in a reduction of cash available for distribution by the Fund commencing in 2011. The earnings impact of the legislation was partially offset by the reduction in the federal corporate tax rate of 0.5% effective in 2011, which was substantively enacted in June 2007. A similar future tax rate change was enacted in June 2006 which resulted in a 7% decline in future tax rates.



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CASH AVAILABLE FOR DISTRIBUTION(1)
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Three months ended Nine months ended
September 30, September 30,
------------------------------------------
(millions of dollars) 2007 2006 2007 2006
----------------------------------------------------------------------------

Cash Provided by Operating Activities 30.6 35.4 71.1 73.0
Add/(Deduct):
ECT preferred unit distributions(2) 9.1 8.7 27.4 26.2
Alliance Canada maintenance capital
expenditures(3) (1.7) (0.8) (2.6) (2.0)
Alliance Canada debt repayments(4) - - (13.1) (14.5)
Alliance Canada cash retained (8.8) (12.7) (20.7) (14.9)
Green Power cash retained 0.1 - (0.4) (4.0)
Saskatchewan System maintenance capital
expenditures3 (1.4) (0.4) (2.3) (0.8)
Change in operating assets and
liabilities in the period(5) (8.9) (12.3) (3.7) (5.0)
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Cash Available for Distribution 19.0 17.9 55.7 58.0
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Cash Available for Distribution is
comprised of the following:
Alliance Canada distributions 17.7 16.1 49.6 51.1
Alliance Canada capital tax (0.1) (0.2) (0.4) (0.7)
Saskatchewan System operating income
before depreciation, amortization and
accretion 5.6 6.4 19.0 18.8
Saskatchewan System maintenance capital
expenditures (1.4) (0.4) (2.3) (0.8)
Green Power distributions 0.7 - 2.9 -
Corporate management and administrative
expense (1.0) (1.4) (3.8) (3.5)
Corporate interest expense (3.4) (2.5) (9.6) (7.2)
Corporate other income - - 0.1 -
Corporate current taxes 0.9 (0.1) 0.2 0.3
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Cash Available for Distribution 19.0 17.9 55.7 58.0
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ECT Preferred Unit Distributions
Declared 9.1 8.7 27.4 26.2
Ordinary and Subordinated Units
Distributions Declared 8.3 8.0 24.9 23.9
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Cash Distributions Declared 17.4 16.7 52.3 50.1
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(1) See Non-GAAP measures.

(2) The cash available for distribution above is compared to the total
distributions, including the ECT preferred unit distributions. Since the
ECT preferred units are treated as debt under GAAP with distributions
deducted from Earnings, the ECT preferred unit distributions have been
added back to the cash provided from operating activities.

(3) Maintenance capital expenditures reduce the cash available for
distribution since these expenditures are funded through cash from
operations.

(4) Debt repayments in Alliance Canada are deducted from cash from
operations in deriving the cash available for distribution because
they are funded from cash from Alliance Canada's operations.

(5) Change in operating assets and liabilities in the period reflect changes
in non-cash working capital related to operating activities. The change
has been deducted from cash available for distribution since
fluctuations in working capital are expected each period and are not
indicative of changes in cash available to be distributed.


The above calculations of cash available for distribution represent cash available to fund distributions on ordinary units, subordinated units and ECT preferred units, as well as for debt repayments and reserves.

For the three months ended September 30, 2007, cash distributions declared of $17.4 million (2006 - $16.7 million) represented 91.6% (2006 - 93.3%) of cash available for distribution and for the nine months ended September 30, 2007, cash distributions declared of $52.3 million (2006 - $50.1 million) represented 93.9% (2006 - 86.4%) of cash available for distribution. As at September 30, 2007, the Fund had distributed 91.8% of cash available since inception.

The cash retained by Alliance Canada and Green Power reflected the cash from operations of these segments that was not distributed to the Fund. While the cash from operations was proportionately consolidated and was included in the results of the Fund, it is not available for distribution by the Fund until it has been received from Alliance Canada and the Green Power segment. Cash retained by Alliance Canada and Green Power includes debt service reserves, capital expenditures and other cash that was needed to fund working capital or other requirements of these segments.

Distributions from Alliance Canada, which are subject to the approval of the Board of Directors of the General Partner of Alliance Canada, are made on a quarterly basis and paid in the month subsequent to quarter end. In the Green Power segment, distributions represent the monthly cash distributions received from the Wind Power projects and the quarterly distributions from NRGreen as well as cash settlements paid or received by the Fund for the wind power purchase swap agreements. Distributions from NRGreen are paid in the month subsequent to quarter end.

In the second quarter of 2007, Alliance Canada returned $1.0 million to the Fund representing a return of contributed surplus from construction accounts. This receipt has been excluded from the cash available for distribution reconciliation, since it relates to enhancement capital. Enhancement capital is funded via debt and equity; therefore, cash received related to enhancement capital is reserved for debt repayments.

The maintenance capital expenditures were determined based on the capital requirements necessary to maintain the service capability of the existing assets and include the replacement of system components and equipment that are worn, obsolete or completing their useful life.

Enbridge Income Fund is an unincorporated, open-ended trust created to provide a stable and sustainable flow of distributable cash to unitholders. The Fund is a premier income fund in Canada with a low-risk profile focused on energy infrastructure assets. Its assets include a 50% interest in the Canadian segment of the Alliance Pipeline, a 100% interest in the various pipelines comprising the Saskatchewan System, and 50% interest in each of NRGreen Limited Partnership and the SunBridge wind project as well as a 33% interest in each of the Magrath and Chin Chute wind projects. Information about Enbridge Income Fund, including the interim consolidated financial statements and MD&A, is available on the Fund's web site at www.enbridgeincomefund.com.



ENBRIDGE INCOME FUND
CONSOLIDATED STATEMENTS OF EARNINGS

Three months ended Nine months ended
(unaudited; millions of dollars, September 30, September 30,
except per unit amounts) 2007 2006 2007 2006
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Revenue 65.0 60.8 197.8 186.2

Expenses
Operating and maintenance 17.8 11.7 51.2 41.1
Management and administrative 1.0 1.4 3.8 3.5
Capital taxes 0.1 0.2 0.6 1.0
Depreciation and amortization 19.1 19.2 60.6 57.9
Accretion on asset retirement
obligations 0.2 0.2 0.4 0.4
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38.2 32.7 116.6 103.9
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26.8 28.1 81.2 82.3
Other Income and Expense 0.2 0.1 1.1 0.6
Interest Expense (15.4) (14.7) (45.9) (44.7)
ECT Preferred Unit Distributions (9.1) (8.7) (27.4) (26.2)
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2.5 4.8 9.0 12.0

Tax Recovery/(Expense)
Current 0.9 (0.1) 0.2 0.3
Future 0.4 1.1 1.1 19.8
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1.3 1.0 1.3 20.1
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Earnings 3.8 5.8 10.3 32.1
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Earnings per Trust Unit
Basic and Diluted 0.11 0.17 0.30 0.93
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ENBRIDGE INCOME FUND
CONSOLIDATED STATEMENTS OF UNITHOLDERS' EQUITY
Nine months ended
September 30,
-------------------
(unaudited; millions of dollars) 2007 2006
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Trust Units 333.4 333.4
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Deficit, Beginning of Period (36.1) (39.3)
Earnings 10.3 32.1
Distributions to unitholders (24.9) (23.9)
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Deficit, End of Period (50.7) (31.1)
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Accumulated Other Comprehensive Loss, Beginning of Period - -
Cumulative impact of change in accounting policy
(Note 1) (6.1) -
Other comprehensive loss (2.4) -
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Accumulated Other Comprehensive Loss, End of Period (8.5) -
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Total Unitholders' Equity 274.2 302.3
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ENBRIDGE INCOME FUND
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three months ended Nine months ended
September 30, September 30,
----------------------------------------
(unaudited; millions of dollars) 2007 2006 2007 2006
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Earnings 3.8 5.8 10.3 32.1
Other Comprehensive Income/(Loss)
Change in unrealized fair value on cash
flow hedges, net of tax (0.2) - (2.7) -
Reclassification of realized losses on
cash flow hedges to earnings 0.2 - 0.3 -
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- - (2.4) -
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Comprehensive Income 3.8 5.8 7.9 32.1
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ENBRIDGE INCOME FUND
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended Nine months ended
September 30, September 30,
----------------------------------------
(unaudited; millions of dollars) 2007 2006 2007 2006
----------------------------------------------------------------------------

Cash Provided by Operating Activities
Earnings 3.8 5.8 10.3 32.1
Charges/(credits) not affecting cash
Depreciation and amortization 19.1 19.2 60.6 57.9
Amortization of deferred financing
charges 0.3 0.3 1.1 1.3
Accretion on asset retirement
obligations 0.2 0.2 0.4 0.4
Amortization of fair value increment on
debt (1.3) (1.3) (3.9) (3.9)
Future income taxes (0.4) (1.1) (1.1) (19.8)
Changes in operating assets and
liabilities
Change in accounts receivable and other 3.1 (1.2) (2.2) 5.7
Change in accounts payable and accrued
liabilities 10.6 15.9 13.7 8.8
Change in deferred amounts and other
assets (4.7) (4.6) (13.7) (12.9)
Change in long-term liabilities (0.1) 2.2 5.9 3.4
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30.6 35.4 71.1 73.0
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Investing Activities
Additions to property, plant and
equipment (18.3) (9.4) (37.3) (12.7)
Change in construction payable 2.4 1.3 (2.0) 0.5
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(15.9) (8.1) (39.3) (12.2)
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Financing Activities
Net change in long-term credit facility 8.1 (4.0) 18.1 (2.0)
Net change in non-recourse credit
facility 2.2 0.4 3.4 -
Repayment of non-recourse long-term
debt - - (13.1) (14.5)
Ordinary and subordinated trust unit
distributions (8.3) (8.0) (24.9) (23.9)
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2.0 (11.6) (16.5) (40.4)
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Increase in Cash and Cash Equivalents 16.7 15.7 15.3 20.4
Cash and Cash Equivalents at Beginning
of Period 16.0 15.8 17.4 11.1
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Cash and Cash Equivalents at End of
Period 32.7 31.5 32.7 31.5
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Cash and Cash Equivalents 11.8 9.1
Cash and Cash Equivalents in Trust 20.9 22.4
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32.7 31.5
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ENBRIDGE INCOME FUND
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
September 30, December 31,
(unaudited; millions of dollars) 2007 2006
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Assets
Current Assets
Cash and cash equivalents 32.7 17.4
Accounts receivable and other 29.7 27.5
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62.4 44.9
Property, Plant and Equipment 1,330.0 1,349.0
Intangible Assets 97.7 101.9
Goodwill 308.1 308.1
Deferred Amounts and Other Assets 63.9 60.3
Future Income Taxes 4.7 3.1
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1,866.8 1,867.3
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Liabilities and Unitholders' Equity
Current Liabilities
Accounts payable and accrued liabilities 45.1 32.0
Distributions payable 2.8 2.8
Current portion of non-recourse long-term debt 27.3 26.1
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75.2 60.9
Long-Term Debt 272.4 259.0
Non-Recourse Long-Term Debt 762.5 781.3
ECT Preferred Units 380.2 380.2
Long-Term Liabilities 21.5 4.8
Asset Retirement Obligations 8.3 7.9
Future Income Taxes 72.5 75.9
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1,592.6 1,570.0
Unitholders' Equity
Trust units 333.4 333.4
Deficit (50.7) (36.1)
Accumulated other comprehensive loss (8.5) -
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274.2 297.3
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1,866.8 1,867.3
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ENBRIDGE INCOME FUND
SEGMENTED INFORMATION

Three months ended September 30, 2007
----------------------------------------------------------------------------
Alliance Saskatchewan Green
(millions of dollars) Canada System Power Corporate Consolidated
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Revenue 51.7 12.2 1.1 - 65.0
Operating and
maintenance (10.7) (6.6) (0.5) - (17.8)
Management and
administrative - - - (1.0) (1.0)
Capital taxes (0.1) - - - (0.1)
Depreciation and
amortization (15.2) (3.2) (0.7) - (19.1)
Accretion on asset
retirement obligations - (0.2) - - (0.2)
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25.7 2.2 (0.1) (1.0) 26.8
Other income and
expense 0.2 - - - 0.2
Interest expense (11.7) - - (3.7) (15.4)
ECT preferred unit
distributions - - - (9.1) (9.1)
Current taxes - - - 0.9 0.9
Future taxes (0.1) 0.8 0.1 (0.4) 0.4
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Earnings 14.1 3.0 - (13.3) 3.8
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Three months ended September 30, 2006
----------------------------------------------------------------------------
Alliance Saskatchewan Green
(millions of dollars) Canada System Power Corporate Consolidated
----------------------------------------------------------------------------
Revenue 48.3 12.5 - - 60.8
Operating and
maintenance (5.7) (6.0) - - (11.7)
Management and
administrative - - - (1.4) (1.4)
Capital taxes (0.2) - - - (0.2)
Depreciation and
amortization (15.3) (3.9) - - (19.2)
Accretion on asset
retirement obligations - (0.2) - - (0.2)
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27.1 2.4 - (1.4) 28.1
Other income and
expense 0.2 (0.1) - - 0.1
Interest expense (12.0) - - (2.7) (14.7)
ECT preferred unit
distributions - - - (8.7) (8.7)
Current taxes - - - (0.1) (0.1)
Future taxes (0.1) 0.9 - 0.3 1.1
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Earnings 15.2 3.2 - (12.6) 5.8
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Nine months ended September 30, 2007
----------------------------------------------------------------------------
Alliance Saskatchewan Green
(millions of dollars) Canada System Power Corporate Consolidated
----------------------------------------------------------------------------
Revenue 155.0 38.0 4.8 - 197.8
Operating and
maintenance (30.8) (18.8) (1.6) - (51.2)
Management and
administrative - - - (3.8) (3.8)
Capital taxes (0.4) (0.2) - - (0.6)
Depreciation and
amortization (46.5) (12.0) (2.1) - (60.6)
Accretion on asset
retirement obligations - (0.4) - - (0.4)
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77.3 6.6 1.1 (3.8) 81.2
Other income and
expense 0.7 - 0.3 0.1 1.1
Interest expense (35.4) - - (10.5) (45.9)
ECT preferred unit
distributions - - - (27.4) (27.4)
Current taxes - - - 0.2 0.2
Future taxes 0.2 3.2 0.3 (2.6) 1.1
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Earnings 42.8 9.8 1.7 (44.0) 10.3
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Nine months ended September 30, 2006
----------------------------------------------------------------------------
Alliance Saskatchewan Green
(millions of dollars) Canada System Power Corporate Consolidated
----------------------------------------------------------------------------
Revenue 149.8 36.4 - - 186.2
Operating and
maintenance (23.9) (17.2) - - (41.1)
Management and
administrative - - - (3.5) (3.5)
Capital taxes (0.7) (0.3) - - (1.0)
Depreciation and
amortization (46.0) (11.9) - - (57.9)
Accretion on asset
retirement obligations - (0.4) - - (0.4)
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79.2 6.6 - (3.5) 82.3
Other income and
expense 0.7 (0.1) - - 0.6
Interest expense (36.7) - - (8.0) (44.7)
ECT preferred unit
distributions - - - (26.2) (26.2)
Current taxes - - - 0.3 0.3
Future taxes 2.6 16.7 - 0.5 19.8
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Earnings 45.8 23.2 - (36.9) 32.1
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