ALLIANCE PIPELINE LIMITED PARTNERSHIP

Condensed Interim Consolidated Financial Statements Third Quarter 2021

Condensed Interim Consolidated Balance Sheets

	September 30	December 31
	2021	2020
(thousands of Canadian dollars; unaudited)
ASSETS
Current assets
Cash and trust accounts (Note 7)	64,090	7,444
Accounts receivable	28,071	31,007
Accounts receivable from related parties (Note 5)	16,132	9,059
Inventory	12,776	8,316
Other current assets	3,831	654
Total current assets	124,900	56,480
Investments held in trust	76,978	75,978
Property, plant and equipment	792,877	840,585
Right-of-use assets	1,356	3,410
TOTAL ASSETS	996,111	976,453

LIABILITIES
Current liabilities
Accounts payable and accrued liabilities (Note 2)	9,983	3,233
Accounts payable and accrued liabilities to related parties (Note 5)	21,829	14,793
Current portion of long-term debt (Note 4)	83,414	82,905
Restricted transportation deposits	6,681	5,281
Other current liabilities	465	2,603
Total current liabilities	122,372	108,815
Regulatory liabilities (Note 3)	125,195	119,224
Long-term debt (Note 4)	552,151	520,445
Other long-term liabilities	1,714	2,561
TOTAL LIABILITIES	801,432	751,045

PARTNERS' EQUITY	194,679	225,408
TOTAL LIABILITIES AND PARTNERS' EQUITY	996,111	976,453

Condensed Interim Consolidated Statements of Income

	Three Months Ended		Nine Months Ended
September 30	2021	2020	2021	2020
(thousands of Canadian dollars; unaudited)
Revenues
Transportation revenue	112,493	101,922	322,693	305,279
Service revenue	5,787	5,716	18,335	19,400
Other revenue	1,326	3,827	5,370	8,374
Total revenues (Note 6)	119,606	111,465	346,398	333,053
Expenses
General and administrative	10,517	10,893	34,175	35,181
Operations and maintenance	35,535	26,516	95,152	74,639
Property taxes	5,760	6,143	17,281	18,428
Depreciation	16,718	16,595	50,584	49,775
Total expenses	68,530	60,147	197,192	178,023
Operating income	51,076	51,318	149,206	155,030
Interest income and other	262	378	299	1,178
Interest expense	(7,855)	(9,155)	(24,834)	(29,400)
Net income	43,483	42,541	124,671	126,808
Net income attributable to Partners	43,048	42,116	123,424	125,540
Net income attributable to General Partner	435	425	1,247	1,268

Condensed Interim Consolidated Statements of Cash Flows

	Three Months Ended		Nine Months Ended
September 30	2021	2020	2021	2020
(thousands of Canadian dollars; unaudited)
Operating activities
Net income	43,483	42,541	124,671	126,808
Depreciation	16,718	16,595	50,584	49,775
Amortization of deferred financing fees (Note 4)	87	98	268	304
Changes in non-cash working capital (Note 7)	1,232	5,165	6,052	12,235
Cash provided by operating activities	61,520	64,399	181,575	189,122

Investing activities
Changes in restricted transportation deposits	1,000	—	1,400	(200)
Net additions to property, plant and equipment	(801)	(1,417)	(2,876)	(2,301)
Cash used in investing activities	199	(1,417)	(1,476)	(2,501)
Financing activities
Repayment of long-term debt (Note 4)	—	—	(41,453)	(41,984)
Distributions paid	(41,201)	(47,400)	(155,400)	(152,000)
Debt issuance costs (Note 4)	—	—	—	(14)
Net change in credit facility (Note 4)	32,800	10,700	73,400	35,700
Cash used in financing activities	(8,401)	(36,700)	(123,453)	(158,298)

Change in cash and trust accounts	53,318	26,282	56,646	28,323
Cash and trust accounts, beginning of period	10,772	10,190	7,444	8,149
Cash and trust accounts, end of period (Note 7)	64,090	36,472	64,090	36,472

Condensed Interim Consolidated Statements of Changes in Partners' Equity

		Three Months Ended		Nine Months Ended
September 30	2021	2020	2021	2020
(thousands of Canadian dollars; unaudited)
Class A Units
Class A - number of units	556,207	556,207	556,207	556,207
Class A unit value - opening balance	127,430	165,621	156,294	183,400
Net income	38,020	37,197	109,008	110,877
Distributions to Partners	(36,025)	(41,445)	(135,876)	(132,904)
Class A unit value - closing balance	129,425	161,373	129,426	161,373

Class B Units
Class B - number of units	73,558	73,558	73,558	73,558
Class B unit value - opening balance	27,996	33,046	31,813	35,397
Net income	5,028	4,919	14,416	14,663
Distributions to Partners	(4,764)	(5,481)	(17,970)	(17,576)
Class B unit value - closing balance	28,260	32,484	28,259	32,484
Contributed Surplus
Contributed surplus - opening balance	31,535	31,535	31,535	31,535
Contributed surplus - closing balance	31,535	31,535	31,535	31,535

General Partner
General Partner - opening balance	5,436	5,873	5,766	6,076
Net income	435	425	1,247	1,268
Distributions to General Partner	(412)	(474)	(1,554)	(1,520)
General Partner - closing balance	5,459	5,824	5,459	5,824
Total Partner's Equity	194,679	231,216	194,679	231,216

Notes to the Condensed Interim Consolidated Financial Statements

(thousands of Canadian Dollars, except where noted; unaudited)

Note 1 Basis of Presentation

The condensed interim consolidated financial statements of Alliance Pipeline Limited Partnership ("Alliance" or the "Partnership") have been prepared by management in accordance with United States Generally Accepted Accounting Principles. Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2021. The condensed interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes for the year ended December 31, 2020.

In management's opinion, the condensed interim consolidated financial statements have been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies of the Partnership.

Subsequent events were evaluated until November 8, 2021, upon which date the condensed interim consolidated financial statements became available to be issued.

Use of Estimates and Judgments

There have been no material changes to Alliance's critical accounting estimates and judgments during the nine months ended September 30, 2021.

Note 2 Accounts Payable and Accrued Liabilities

	September 302021	December 312020
Trade payable and accrued liabilities	4,398	997
Interest accruals	4,263	190
Operating accruals	104	118
Contract liabilities	1,218	1,444
Other	—	484
Total accounts payable and accrued liabilities	9,983	3,233

Note 3 Regulatory Liabilities

	September 302021	December 312020
Recoverable cost variance	45,934	41,073
Pipeline abandonment surcharges	79,261	78,151
Total regulatory liabilities	125,195	119,224

Alliance Pipeline Limited Partnership Financial Statements and Notes Third Quarter 2021

The recoverable cost variance reflects the differences between amounts invoiced for specified recoverable costs, as outlined in the transportation tariff, and the related expenses recognized in the condensed interim consolidated statements of income.

The pipeline abandonment surcharges relate to the difference between funds in the Alliance Pipeline Abandonment Trust and expenses related to the abandonment of pipeline assets.

Note 4 Long-Term Debt

Alliance's debt consists of senior secured notes and a revolving credit facility. The fair value of the long-term debt is estimated using an income approach based on quoted market prices for the same or similar debt instruments.

	Carrying Value		Fair Value
	September 30December 3120212020		September 302021	December 312020
Total debt	636,155	604,208	677,841	663,719
Less:
Deferred financing fees	(590)	(858)	(590)	(858)
Current portion of long-term debt	(83,414)	(82,905)	(89,876)	(92,355)
Total long-term debt	552,151	520,445	587,375	570,506

As at September 30, 2021, outstanding letters of credit issued under the revolving credit facility were $19.6 million (December 31, 2020 - $60.7 million).

As at September 30, 2021, Alliance was in compliance with all debt covenants contained in the agreements governing its senior secured notes and revolving credit facility.

Note 5 Related Parties

Alliance engaged in related party transactions that were conducted in the normal course of business and, unless otherwise noted, were measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. Related parties are entities related by virtue of common ownership, unless otherwise noted.

Related Party Transactions

	Three Months Ended		Nine Months Ended
September 30	2021	2020	2021	2020
Transportation revenue	27,802	18,500	68,141	55,561
Service and other revenue	6,209	8,391	19,586	24,240
Operator charges	24,889	23,467	67,731	66,890
Service charges	392	492	1,182	1,582
Capital assets and inventory charges	863	828	2,231	2,715

Accounts Receivable from Related Parties

	September 302021	December 312020
Transportation revenue due from related parties	11,820	4,925
Enbridge affiliates(1)	2,000	2,000
Alliance Pipeline entities(2)	1,910	2,019
NRGreen entities(3)	402	115
Total amounts due from related parties	16,132	9,059

(1) Enbridge Inc. and its subsidiaries ("Enbridge affiliates").

(2) Alliance Pipeline L.P. and Alliance Pipeline Ltd. ("Alliance Pipeline entities").

(3) NRGreen Power Limited Partnership and NRGreen Power Ltd. ("NRGreen entities").

Accounts Payable and Accrued Liabilities to Related Parties

	September 302021	December 312020
Enbridge affiliates	18,879	12,959
Pembina affiliates(1)	2,812	1,562
Alliance Pipeline entities	138	211
NRGreen entities	—	61
Total amounts due to related parties	21,829	14,793

(1) Pembina Pipeline Corporation and its subsidiaries ("Pembina affiliates").

Note 6 Revenue

Revenue Categories

	Three Months Ended		Nine Months Ended
September 30	2021	2020	2021	2020
Firm transportation services(1)	110,757	100,543	318,815	302,266
PITS/IT services(2)	1,489	1,044	3,461	2,281
Ancillary services	247	335	417	732
Service revenue	5,787	5,716	18,335	19,400
Other revenue	1,326	3,827	5,370	8,374
Total revenue	119,606	111,465	346,398	333,053

(1) Includes long-term and seasonal/short-term firm transportation revenue.

(2) Includes Priority Interruptible Transportation Services/Interruptible Transportation Services ("PITS/IT").

Contract balances at September 30, 2021 include deferred revenue for advances received for construction contracts of $2.0 million (December 31, 2020 – $2.8 million) and are included in accounts payable and accrued liabilities and other long-term liabilities on the condensed interim consolidated balance sheets.

Receivables from contracts with customers at September 30, 2021 were $40.9 million (December 31, 2020 – $37.5 million) and are included in accounts receivable and accounts receivable from related parties on the condensed interim consolidated balance sheets.

Alliance Pipeline Limited Partnership Financial Statements and Notes Third Quarter 2021

Significant Shippers

For the nine months ended September 30, 2021, Alliance had two significant shippers that represented 30.9% and 11.2% of contracted revenue (September 30, 2020 – one significant shipper - 31.4%). Total contracted revenue based on transportation agreements with the significant shippers amounted to $43.4 million for the three months ended September 30, 2021 (September 30, 2020 - $31.4 million) and $127.1 million for the nine months ended September 30, 2021 (September 30, 2020 - $93.9 million).

Note 7 Supplemental Cash Flows Information

Changes in Non-Cash Working Capital

	Three Months Ended		Nine Months Ended
September 30	2021	2020	2021	2020
Accounts receivable	(3,134)	(494)	2,936	3,002
Accounts receivable from related parties	(3,730)	735	(7,073)	935
Inventory	(786)	1,102	(4,460)	1,428
Investments held in trust	(1,485)	(1,759)	(1,000)	(14,529)
Other current assets	(3,252)	(445)	(3,177)	625
Accounts payable and accrued liabilities	2,236	(1,450)	6,750	5,761
Accounts payable and accrued liabilities to related parties	11,588	2,911	7,036	(6,696)
Regulatory liabilities	605	4,769	5,971	23,060
Other current and long-term liabilities	(810)	(204)	(931)	(1,351)
Total changes in non-cash working capital	1,232	5,165	6,052	12,235

Cash and Trust Accounts

	September 302021	December 312020
Cash	369	369
Trust accounts	63,721	7,075
Total cash and trust accounts	64,090	7,444

Note 8 Risk Management

Ongoing Impact of the COVID-19 Pandemic

Following the World Health Organization declaring the COVID-19 outbreak to be a pandemic, many governments imposed restrictions on individuals and businesses, resulting in a significant slowdown of the global economy. There have been positive signals in the first nine months of 2021 with increased commodity prices, however, demand recovery remains affected by the ongoing COVID-19 pandemic. Although restrictions have been relaxed in certain jurisdictions and vaccination programs are underway, there remains significant uncertainty as to the global economic outlook and potential for continued volatility in the global economy as a result of the COVID-19 pandemic, which could impact the Partnership's ongoing operations and financial position.

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