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DELIVERINGSTABILITY2015 ANNUAL

R E P O R T

Suite 3200, 215 - 2nd Street S.W.

Calgary, Alberta, Canada, T2P 1M4

Telephone: (403) 290 6000

Fax: (403) 290 6092

Toll Free: 1 866 716 PIPE (7473)

Emergency (24hr): 1 800 727 7163

Website: interpipeline.com

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207919-03_IPL_AR_8.375x10.875_v18_COVER.indd 1 3/10/16 8:47 AM

HEAD OFFICE

Inter Pipeline Ltd.



Telephone: (403) 290 6000

Fax: (403) 290 6092

Toll Free: 1 (866) 716 PIPE (7473)

Emergency (24hr): 1 (800) 727 7163


REGISTRAR AND TRANSFER AGENT

Computershare Trust Company of Canada

#600, 530 - 8th Avenue S.W.

Calgary, Alberta, Canada, T2P 3S8

Telephone: 1 (800) 564 6253

E-mail: [email protected]

AUDITORS

Ernst & Young LLP Chartered Accountants

1000, 440 – 2nd Avenue S.W.

Calgary, Alberta, Canada, T2P 5E9

STOCK EXCHANGE LISTING

Common Shares trade under the symbol IPL

on the Toronto Stock Exchange (TSX)

INVESTOR AND MEDIA RELATIONS

Jeremy Roberge

Vice President, Capital Markets


Telephone: (403) 290 6015

Breanne Feigel

Manager Corporate Communications


Telephone: (587) 475 1118

ABBREVIATIONS

bbls Barrels

bcf Billion cubic feet

bcf/d Billion cubic feet per day

b/d Barrel(s) per day

GJ Gigajoule

km Kilometre

$ MM Millions of dollars

mmcf Million cubic feet

mmcf/d Million cubic feet per day

MW Megawatt

MWh Megawatt hour

C O N TAC T S

Inter Pipeline is a major petroleum transportation, natural gas liquids extraction,

and bulk liquid storage business based in Calgary, Alberta, Canada. We own and

operate energy infrastructure assets in western Canada and Europe. Each day,

Inter Pipeline transports, processes and handles 2.2 million barrels of energy products.

Our pipeline systems in Canada span over 7,200 kilometres in length and transport

approximately 1.26 million barrels per day. In Europe we operate one of the largest

independent tank storage businesses, providing approximately 27 million barrels of

storage at 16 terminals in the United Kingdom, Ireland, Germany, Denmark and Sweden.

Our NGL extraction facilities have the capacity to process 6.2 billion cubic feet of

natural gas per day and we are one of the largest natural gas liquids extraction

businesses in North America.

We are a member of the S&P/TSX 60 Index and our common shares

trade on the Toronto Stock Exchange under the symbol IPL.


A N N UA L R E P O RT 2015 1

TA B L E O F C O N T E N T S

Message from the Chief Executive Officer

Financial and Operating Highlights

Management’s Discussion and Analysis

2015 Highlights

Consolidated Financial Statements

Notes to the Consolidated Financial Statements

Corporate Information

3

7

9

10

71

78

118

2 I N T E R P I P E L I N E

“INTER PIPELINE’S PORTFOLIO OF WORLD SCALE

ENERGY INFRASTRUCTURE ASSETS IN CANADA AND

EUROPE WILL PROVIDE VALUABLE TRANSPORTATION,

PROCESSING AND STORAGE SERVICES

TO MANY OF THE WORLD’S MOST PROMINENT

ENERGY AND PETROCHEMICAL COMPANIES

FOR MANY YEARS TO COME.”

– Christian Bayle

President and

Chief Executive Off icer

3A N N UA L R E P O RT 2015

P I P E L I N E VO LU M E S

(000’s b/d)

2011

956

2012

98

8

2013

1,015

2014

1,118

2015

1,258

F U N D S F R O M O P E R AT I O N S

($Million)

2011

394

2012

434

2013

473

2014

564

2015

774

D I V I D E N D S

($/Share)

2011

$0.9

7

2012

$1.0

6

2013

$1.18

2014

$1.3

2

2015

$1.4

9

G R OW T H & AC Q U I S I T I O N C A P I TA L

($Million)

2011

133

2012

98

2

2013

2,71

6

2014

3,8

57

2015

4,26

9

The value of this prudent philosophy has been

clearly demonstrated during a very challenging

business environment in 2015.

STRENGTH IN UNCERTAIN TIMES

Against the backdrop of a collapse of world

energy prices, we generated record financial

and operating results in 2015. Our annual

EBITDA grew 40% to $980 million, and funds

from operations reached $774 million, a 37%

improvement over 2014. We also showed

confidence in the outlook for our business when

we delivered our 13th consecutive dividend

increase to shareholders in the fall of 2015.

This was done without sacrificing our practice

of maintaining a conservative payout ratio,

which averaged 68% for the year before

sustaining capital.

We were able to deliver these strong financial

results for two important reasons. First, from mid-

2014 through the end of 2015, we commissioned

approximately $3 billion of accretive new pipeline

and facility projects, driving significant cash flow

growth. Second, these investments, as well as

the majority of our commercial activities, are

underpinned by stable and predictable long-term

cost-of-service contracts. The quality of Inter

Pipeline’s assets and the highly secure revenues

they provide have been a source of considerable

strength in these uncertain times.

GROWING OUR COMPANY

A basic truism that applies to energy

infrastructure companies is that you grow

when your customers grow. Inter Pipeline

is no exception to this tenet. Many of our

customers have been hard hit by the rapid

decline in world oil prices. Most oil producers

have sensibly curtailed their capital budgets,

and many planned expansions have been

deferred until a stronger commodity price

environment returns.

Despite these challenges, we made

meaningful progress advancing our

commercial objectives, particularly in

our conventional oil gathering and bulk

liquid storage business segments. We

commissioned a record $123 million of

new oil battery connections and pipeline

expansions along our conventional gathering

systems in 2015. Several new connection

agreements were also concluded which

will drive approximately $45 million in new

lateral and pumping facility investments in

2016. The majority of the new connections

and expansions are in response to continued

production growth in the Viking light oil play

located in western Saskatchewan. Inter

Pipeline’s Mid-Saskatchewan pipeline system

is uniquely positioned to service this important

producing region. Additionally, in the spring of

OUR COMPANY HAS EXPERIENCED TREMENDOUS GROWTH OVER THE PAST DECADE. IN OUR PURSUIT OF GROWTH, WE NEVER LOST SIGHT OF ONE OF OUR FOUNDING PRINCIPLES, DELIVERING STABILITY.

M E S S AG E F R O M T H E C H I E F E X EC U T I V E O F F I C E R



(000’s b/d)

2011

956

2012

98

8

2013

1,015

2014

1,118

2015

1,258


($Million)

2011

394

2012

434

2013

473

2014

564

2015

774

D I V I D E N D S

($/Share)

2011

$0.9

7

2012

$1.0

6

2013

$1.18

2014

$1.3

2

2015

$1.4

9


($Million)

2011

133

2012

98

2

2013

2,71

6

2014

3,8

57

2015

4,26

9

2015, we announced a $65 million project to

add 400,000 barrels of new storage capacity

at the Mid-Saskatchewan Kerrobert Terminal.

Inter Pipeline’s European bulk liquid storage

business generated impressive results in 2015.

Lower commodity prices drove higher tank

utilization rates across the business segment.

In total over 40 storage contracts were won

or renewed during the year with several of our

terminals ending the year at full capacity.

In aggregate, utilization rates improved from

90% in January 2015 to 97% in December.

Strong demand for storage at our European

facilities has sparked a record capital investment

program. Approximately $40 million of storage

expansions are planned for 2016 with the

majority of the capital investments made

at our terminals based in the United Kingdom

and Germany.

In June 2015, Inter Pipeline also acquired

its fourth high quality European bulk liquid

storage business. Four coastal petroleum

and petrochemical storage terminals located

in Sweden were purchased for $131 million.

The new terminals are highly complementary

with our existing storage operations in the UK,

Denmark, Germany and Ireland, and increased

our total storage capacity in Europe by 40%

to 27 million barrels. Inter Pipeline now has

$1.2 billion worth of storage assets in Europe

which generated a record $98 million in cash

flow in 2015. These quality terminals provide

valuable diversification to our Canadian

operations and have proven their worth during

these turbulent times.

Finally, in oil sands transportation, we

completed our seventh connection to the

Polaris pipeline system when we began

shipping diluent to the Athabasca Oil

Corporation Hangingstone project in June 2015.

We also commissioned a $45 million capacity

expansion on Polaris in support of the second

phase of the Kearl oil sands project, operated by

an affiliate of Imperial Oil. Throughput volumes

have risen dramatically on the Polaris pipeline

system throughout the year, achieving a record

168,000 barrels per day in the fourth quarter of

2015, a 43% year-over-year increase.

THOUGHTS ON THE FUTURE

The true strength of a company is demonstrated

during adversity. Inter Pipeline was tested

in 2015 and its disciplined and conservative

business model proved resilient.

Looking forward, I have complete confidence in

Inter Pipeline’s future.

The world needs energy. Inter Pipeline’s portfolio

of world scale energy infrastructure assets

in Canada and Europe will provide valuable

transportation, processing and storage services

to many of the world’s most prominent energy

and petrochemical companies for many years to

come. Importantly, we are built for future growth.

Our NGL extraction facilities are among the

largest in North America and are strategically

located on Alberta’s major natural gas export

system. Our conventional oil pipeline systems

form a powerful gathering franchise and are

very well positioned to continue to benefit from

THE TRUE STRENGTH OF A COMPANY IS DEMONSTRATED DURING ADVERSITY.



(000’s b/d)

2011

956

2012

98

8

2013

1,015

2014

1,118

2015

1,258


($Million)

2011

394

2012

434

2013

473

2014

564

2015

774

D I V I D E N D S

($/Share)

2011

$0.9

7

2012

$1.0

6

2013

$1.18

2014

$1.3

2

2015

$1.4

9


($Million)

2011

133

2012

98

2

2013

2,71

6

2014

3,8

57

2015

4,26

9

advances in oil production technology. As an

owner of one of Europe’s largest independent

storage businesses, Inter Pipeline provides

vital services to regional petroleum and

petrochemical markets. Strong demand for

our storage and handling services are driving

record organic investments, with the potential

for additional growth through accretive,

complementary acquisitions.

Finally, our competitive position in Canadian

oil sands transportation is unrivaled. Inter

Pipeline’s three oil sands transportation

systems have a combined ultimate capacity

of 4.6 million barrels per day. Our strategy of

building in material surplus mainline capacity

beyond what is currently contracted places

us in an advantageous position to grow in a

stronger oil price environment. We are able to

accommodate new oil sands transportation

opportunities in our service areas quickly,

competitively and accretively. This strategy has

provided significant shareholder value in the

past, and I am confident it will in the future.

RECOGNITION

You cannot create a world class energy

infrastructure business if it is not backed by a

talented team. Inter Pipeline is very fortunate

to have employees who are committed to our

core values of honesty, integrity, teamwork, the

pursuit of excellence and entrepreneurialism.

They bring energy, skill and experience to their

work every day and drive our business forward.

Our people accomplished a lot in 2015. We

completed commissioning of over $1.6 billion

of new pipeline infrastructure. Our pipeline

transportation systems also handled a record

1.26 million barrels per day of petroleum in

2015, including setting a new monthly record


of 1.37 million barrels per day in December. Our

NGL extraction plants reliably processed 2.7

billion cubic feet per day of natural gas for our

customers and our European colleagues stored

and handled over 70 million barrels of product to

and from 136,000 ships, rail cars and road tankers.

All this was done while maintaining the highest

environmental, safety and compliance standards

and upholding our commitment to be a responsible

and respected member of our communities. On

behalf of Inter Pipeline’s management team, I wish

to express my sincere thanks to our employees for

their dedication and service.

I also would like to acknowledge and thank

our Board of Directors for their guidance and

support. Their vision and thoughtful leadership

has enabled Inter Pipeline to become the

enterprise it is today.

Though 2015 presented many challenges for

the energy sector, we ended the year with an

enviable portfolio of high quality assets, an

investment grade credit rating, a high quality

customer base and a cohesive organization

culture. From this stable foundation we are

well positioned to meet today’s challenges and

continue to prosper. We are ready for the future.

Christian Bayle

President and Chief Executive Officer


F I N A N C I A L & O P E R AT I N G H I G H L I G H T S

2015 2014 % Change

OPERATING

Volumes (thousands of barrels per day)

Pipeline volumes

Oil sands transportation* 1,046.1 912.9 15

Conventional oil pipelines 211.7 205.2 3

Total pipeline 1,257.8 1,118.1 13

NGL extraction volumes*

Ethane 62.1 62.9 (1)

Propane-plus 39.6 34.7 14

Total extraction 101.7 97.6 4

Capacity utilization (%)

Bulk liquid storage 94 79 19

*Empress V NGL production and Cold Lake volumes reported on a 100% basis.

2015 2014 % Change

FINANCIAL

($ millions, except where noted)

Revenue 1,676.3 1,556.3 8

Adjusted EBITDA 979.7 696.5 41

Funds from operations 774.1 564.0 37

Net income 463.0 349.5 33

Cash dividends 497.1 423.1 17

Cash dividends (per share) 1.485 1.320 13

Payout ratio (%) 67.8 77.3 (12)

Total assets 9,029.4 8,647.2 4

Shareholders’ equity 2,821.1 2,548.1 11

Market capitalization 7,472.0 11,724.1 (36)

Total enterprise value 12,323.7 16,314.8 (24)

8 I N T E R P I P E L I N E2 INTER PIPELINE

FORWARD-LOOKING INFORMATION The following Management’s Discussion and Analysis (MD&A) highlights Inter Pipeline Ltd.’s (Inter Pipeline) significant business results and statistics for the three month period and year ended December 31, 2015, to provide Inter Pipeline’s shareholders and potential investors with information about Inter Pipeline and its subsidiaries, including management’s assessment of Inter Pipeline’s and its subsidiaries’ future plans and operations. This information may not be appropriate for other purposes. Effective September 1, 2013, Inter Pipeline completed an arrangement pursuant to which, among other things, the outstanding Class A units of Inter Pipeline Fund were converted into common shares of Inter Pipeline Ltd. This resulted in the conversion to a dividend paying corporation, Inter Pipeline Ltd., which continues as a successor issuer to Inter Pipeline Fund (Corporate Conversion). In this MD&A, any references to Inter Pipeline prior to September 1, 2013 refer to Inter Pipeline Fund and its consolidated subsidiaries, and any references to Inter Pipeline subsequent to September 1, 2013 refer to Inter Pipeline Ltd. and its consolidated subsidiaries. Similarly, any references to common shares, shareholders or dividends used prior to September 1, 2013, refer to Class A units, unitholders and distributions of Inter Pipeline Fund, and any references to common shares, shareholders or dividends used subsequent to September 1, 2013 refer to common shares, shareholders and dividends of Inter Pipeline Ltd. This MD&A contains certain forward-looking statements or information (collectively referred to as “forward-looking statements”) within the meaning of applicable securities legislation. Forward-looking statements often contain terms such as "may", "will", "should", "anticipate", "expect", “continue”, “estimate”, “believe”, “project”, “forecast”, “plan”, “intend”, “target” and similar words suggesting future outcomes or statements regarding an outlook. Any statements herein that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements in this MD&A include, but are not limited to, statements regarding: 1) Inter Pipeline’s beliefs that it is well positioned to maintain its current level of dividends to its shareholders through 2016 and beyond; 2) the maintenance of Inter Pipeline's dividend level combined with the tax treatment of dividends to its shareholders; 3) Inter Pipeline being well positioned to operate and grow in the future; 4) funds from operations projections; 5) timing for completion of various projects; 6) timing and cost schedules of capital projects, and forward EBITDA (as defined herein) estimates in respect of these projects; and, 7) capital expenditure forecasts.

Readers are cautioned not to place undue reliance on forward-looking statements; as such statements are not guarantees of future performance. Inter Pipeline in no manner represents that actual results, levels of activity and achievements will be the same in whole or in part as those set out in the forward-looking statements herein. Such information, although considered reasonable by Inter Pipeline may later prove to be incorrect and actual results may differ materially from those anticipated in the forward-looking statements. By their nature, forward-looking statements involve a variety of assumptions and are subject to various known and unknown risks, uncertainties and other factors, which are beyond Inter Pipeline’s control, including, but not limited to: risks and assumptions associated with operations, such as Inter Pipeline’s ability to successfully implement its strategic initiatives and achieve expected benefits, including the further development of its pipeline systems; assumptions concerning operational reliability; the availability and price of labour and construction materials; the status, credit risk and continued existence of customers having contracts with Inter Pipeline and its affiliates; availability of energy commodities; volatility of and assumptions regarding prices of energy commodities; competitive factors, pricing pressures and supply and demand in the natural gas and oil transportation, ethane transportation and natural gas liquids (NGL) extraction and storage industries; assumptions based upon Inter Pipeline’s current guidance; fluctuations in currency and interest rates; inflation; the ability to access sufficient capital from internal and external sources; risks and uncertainties associated with Inter Pipeline’s ability to maintain its current level of cash dividends to its shareholders; risks inherent in Inter Pipeline’s Canadian and foreign operations; risks of war, hostilities, civil insurrection, instability and political and economic conditions in or affecting countries in which Inter Pipeline and its affiliates operate; severe weather conditions; terrorist threats; risks associated with technology; Inter Pipeline’s ability to generate sufficient cash flow from operations to meet its current and future obligations; Inter Pipeline’s ability to access external sources of debt and equity capital; general economic and business conditions; the potential delays of, and costs of overruns on, construction projects in all of Inter Pipeline’s business units, including, but not limited to, Inter Pipeline’s expansion of its pipeline systems; risks associated with the failure to finalize formal agreements with counterparties in circumstances where letters of intent or similar agreements have been executed and announced by Inter Pipeline; Inter Pipeline’s ability to make capital investments and the amounts of capital investments; changes in laws and regulations, including environmental, regulatory and taxation laws, and the interpretation of such changes to Inter Pipeline’s business; the risks associated with existing and potential future lawsuits and regulatory actions against Inter Pipeline and its affiliates; increases in maintenance, operating or financing costs; availability of adequate levels of insurance; difficulty in obtaining necessary regulatory approvals and maintenance of support of such approvals; and such other risks and uncertainties described from time to time in Inter Pipeline’s reports and filings with the Canadian securities authorities. The impact of any one assumption, risk, uncertainty or other factor on a particular forward-looking statement cannot be determined with certainty, as these are interdependent and Inter Pipeline’s future course of action depends on management’s assessment of all information available at the relevant time.

Readers are cautioned that the foregoing list of important factors is not exhaustive. See also the section entitled RISK FACTORS for further risk factors. The forward-looking statements contained in this MD&A are made as of the date of this document and, except to the extent expressly required by applicable securities laws and regulations, Inter Pipeline assumes no obligation to update or revise forward-looking statements made herein or otherwise, whether as a result of new information, future events, or otherwise. The forward-looking statements contained in this document and all subsequent forward-looking statements, whether written or oral, attributable to Inter Pipeline or persons acting on Inter Pipeline’s behalf are expressly qualified in their entirety by these cautionary statements.

9M A N AG E M E N T ’S D I S C U S S I O N A N D A N A LYS I S MANAGEMENT’S DISCUSSION AND ANALYSIS 3

Management’s Discussion and Analysis For the three month period and year ended December 31, 2015 The MD&A provides a detailed explanation of Inter Pipeline’s operating results for the three month period and year ended

December 31, 2015, as compared to the three month period and year ended December 31, 2014. The MD&A should be

read in conjunction with the unaudited condensed interim consolidated financial statements (interim financial statements)

and MD&A for the quarterly periods ended March 31, June 30 and September 30, 2015, the MD&A and audited

consolidated financial statements for the year ended December 31, 2014, the audited consolidated financial statements

for the year ended December 31, 2015, the Annual Information Form, and other information filed by Inter Pipeline at

www.sedar.com.

Financial information presented in this MD&A is based on information in Inter Pipeline’s consolidated financial statements

prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting

Standards Board (IASB).

This MD&A reports certain financial measures that are not recognized by Canadian generally accepted accounting

principles (GAAP), as outlined in the Chartered Professional Accountant (CPA) Handbook Part I, and used by management

to evaluate the performance of Inter Pipeline and its business segments. Since certain non-GAAP and additional GAAP

financial measures may not have a standardized meaning, securities regulations require that non-GAAP and additional

GAAP financial measures are clearly defined, qualified and reconciled with their nearest GAAP measure. See the NON-

GAAP AND ADDITIONAL GAAP FINANCIAL MEASURES section for further information on the definition, calculation and

reconciliation of non-GAAP and additional GAAP financial measures. All amounts are in Canadian dollars unless specified

otherwise.

Management determines whether information presented in this MD&A is material based on whether it believes a

reasonable investor’s decision to buy, sell or hold securities in Inter Pipeline would likely be influenced or changed if the

information was omitted or misstated.

Table of Contents FORWARD-LOOKING INFORMATION ......................................... 2

2015 HIGHLIGHTS ...................................................................... 4

FOURTH QUARTER HIGHLIGHTS ................................................ 4

PERFORMANCE OVERVIEW ....................................................... 5

OUTLOOK................................................................................... 7

RESULTS OF OPERATIONS .......................................................... 9

SUMMARY OF QUARTERLY RESULTS ....................................... 22

LIQUIDITY AND CAPITAL RESOURCES ...................................... 23

DIVIDENDS TO SHAREHOLDERS ............................................... 29

OUTSTANDING SHARE DATA ................................................... 30

RISK MANAGEMENT AND FINANCIAL INSTRUMENTS.............. 30

TRANSACTIONS WITH RELATED PARTIES ................................. 32

CONTROLS AND PROCEDURES ................................................ 33

CRITICAL ACCOUNTING ESTIMATES......................................... 33

FUTURE ACCOUNTING PRONOUNCEMENTS ........................... 42

RISK FACTORS .......................................................................... 43

NON-GAAP AND ADDITIONAL GAAP FINANCIAL MEASURES ... 60

ADDITIONAL INFORMATION .................................................... 64

8

10 36

36

10 38

11 39

13 39

15 48

2828 49

35 70

29 66


2015 HIGHLIGHTS • Generated record funds from operations* (FFO) of $774 million, a 37 percent increase over 2014 results

• Net income increased 33 percent to a record $463 million for the year

• Declared cash dividends of $497 million, or $1.49 per share

• Attractive annual payout ratio* of 68 percent

• Announced a six percent increase to monthly cash dividends, the 13th consecutive increase for Inter Pipeline shareholders

• Annual throughput volumes on Inter Pipeline’s oil sands and conventional oil pipeline systems averaged a record 1,257,800 barrels per day (b/d)

• Commissioned $1.6 billion of new oil sands pipeline and facilities on its Cold Lake and Polaris pipeline systems

• Completed a $112 million expansion of Mid-Saskatchewan conventional pipeline system

• Acquired four petroleum and petrochemical storage terminals in Sweden for $131 million, increasing European storage capacity by approximately 40 percent

• Bulk liquid storage capacity utilization averaged 94 percent for the year, up from an average 79 percent in 2014

FOURTH QUARTER HIGHLIGHTS • Record quarterly FFO* of $211 million, a 32 percent increase over fourth quarter 2014

• Net income increased to a new quarterly record of $138 million

• Average throughput volumes on Inter Pipeline’s oil sands and conventional oil pipeline systems were 1,326,600 b/d in the quarter

* Please refer to the NON-GAAP AND ADDITIONAL GAAP FINANCIAL MEASURES section.


PERFORMANCE OVERVIEW

2015 2014 2015 2014 2013

RevenuesOil sands transportation $ 213.4 $ 140.5 $ 768.7 $ 476.7 $ 388.5 Conventional oil pipelines 89.0 87.1 322.4 363.9 302.2 Bulk liquid storage 64.8 39.5 214.4 167.1 151.3 NGL extraction 88.5 123.0 370.8 548.6 520.7

455.7$ 390.1$ 1,676.3$ 1,556.3$ 1,362.7$

Funds from operations(1)(2)

Oil sands transportation(2) $ 157.8 $ 97.2 $ 569.1 $ 306.1 $ 219.7 Conventional oil pipelines 51.5 46.8 194.6 191.1 174.9 Bulk liquid storage 28.2 15.8 98.3 75.4 73.2 NGL extraction 25.2 24.7 100.8 142.3 170.7 Corporate costs (51.3) (24.8) (188.7) (150.9) (165.9)

211.4$ 159.7$ 774.1$ 564.0$ 472.6$

Per share(1) $ 0.63 $ 0.49 $ 2.31 $ 1.76 $ 1.65

Net income(3) $ 138.0 $ 79.6 $ 463.0 $ 349.5 $ (47.0)Net income attributable to shareholders(3) $ 129.7 $ 75.6 $ 427.4 $ 334.8 $ (58.1)

Per share – basic $ 0.39 $ 0.24 $ 1.28 $ 1.05 $ (0.20)Per share – diluted $ 0.39 $ 0.23 $ 1.28 $ 1.02 $ (0.20)

Dividends to shareholders $ 128.7 $ 114.9 $ 497.1 $ 423.1 $ 338.2

Per share(4) $ 0.3825 $ 0.3525 $ 1.4850 $ 1.3200 $ 1.1775 Shares outstanding (basic)

Weighted average 336.3 325.8 334.6 320.2 285.9End of period 336.4 326.2 336.4 326.2 306.8

Capital expenditures(5)

Growth(1) $ 52.6 $ 150.3 $ 296.3 $ 1,195.7 $ 1,918.9

Sustaining(1) 27.8 12.7 59.6 40.5 30.1 80.4$ 163.0$ 355.9$ 1,236.2$ 1,949.0$

Payout ratio(1) 63.8% 74.0% 67.8% 77.3% 73.6%

2015 2014 2013

Total assets 9,029.4$ 8,647.2$ $ 7,657.7

Total debt(6) 4,851.7$ 4,590.7$ $ 3,960.8 Total shareholders’ equity 2,821.1$ 2,548.1$ $ 2,100.3

Enterprise value(1) 12,323.7$ 16,314.8$ $ 11,885.4 Consolidated Net Debt to Total Capitalization(1) 52.8% 52.2% 50.1%

(millions, except % amounts)

(millions, except per share and % amounts)Three Months Ended December 31 Years Ended December 31

As at December 31

(1) Please refer to the NON-GAAP AND ADDITIONAL GAAP FINANCIAL MEASURES section.

(2) Funds from operations(1) include non-controlling interest amounts of $9.8 million and $41.0 million for the three month period and year ended December 31, 2015, respectively ($4.4 million and $16.8 million for the three month period and year ended December 31, 2014, respectively).

(3) In June 2013, Inter Pipeline completed several internal transactions related to the restructuring of its limited partnership structure to position the business for the Corporate Conversion by indirectly purchasing its general partner, for initial consideration of $170 million, plus closing adjustments of $8.6 million, and a future second instalment of $170 million, which was satisfied upon the conversion of the convertible shares in January 2015.

(4) Dividends to shareholders are calculated based on the number of common shares outstanding at each record date.

(5) Amounts reported on a 100% basis that includes non-controlling interest.

(6) Total debt reported in the December 31, 2015 consolidated financial statements of $4,832.7 million, includes long-term debt, short-term debt and commercial paper of $4,851.7 million less discounts and debt transaction costs of $19.0 million.


Year Ended December 31, 2015 Inter Pipeline generated record financial results in 2015 as FFO* increased $210.1 million or 37.3%, from $564.0 million in

2014 to $774.1 million in 2015. The increase was largely driven by record financial results in the oil sands transportation

business where FFO* increased $263.0 million or 85.9%, from $306.1 million in 2014 to $569.1 million in 2015. These

increases are primarily due to expanded transportation services on the Cold Lake and Polaris pipeline systems. Record

FFO* was also generated in the bulk liquid storage business, which increased $22.9 million to $98.3 million in 2015, due to

the acquisition of Inter Terminals Sweden in June 2015 and higher utilization rates. Operating results in the conventional

oil pipelines business increased $3.5 million, over 2014, to a new annual record of $194.6 million in 2015, largely due to

higher volumes on the Mid-Saskatchewan pipeline system. FFO* from the NGL extraction business was $100.8 million, a

decrease of $41.5 million from 2014, largely due to lower frac-spread pricing on propane-plus sales at the Cochrane

straddle plant. Corporate costs increased $37.8 million to $188.7 million in 2015, primarily due to higher financing costs

and current income taxes, but were partially offset by reduced general and administrative costs.

For the year ended December 31, 2015, Inter Pipeline’s net income reached a new record of $463.0 million, an increase of

$113.5 million or 32.5%, from $349.5 million in 2014. The increase is primarily due to higher FFO* as discussed above,

partially offset by increased deferred income tax, depreciation and amortization, and a loss on disposal of assets.

Total dividends to shareholders increased $74.0 million or 17.5% from $423.1 million in 2014 to $497.1 million in 2015,

due to higher monthly dividend rates and incremental common shares outstanding. Inter Pipeline announced dividend

rate increases of $0.18 and $0.09 per common share on an annualized basis in November 2014 and November 2015,

respectively. The overall number of common shares outstanding increased due to the conversion of convertible shares in

January 2015 and shareholder participation in Inter Pipeline’s dividend reinvestment plan. For the year ended December

31, 2015, Inter Pipeline’s payout ratio* was 67.8%, down from 77.3% for 2014.

Inter Pipeline’s total debt outstanding, which includes $1,536.2 million of non-recourse debt held at Inter Pipeline

(Corridor) Inc., increased $261.0 million from $4,590.7 million at December 31, 2014 to $4,851.7 million at December 31,

2015. Inter Pipeline invested $347.6 million (Inter Pipeline’s share) on capital projects in 2015, and funded the $131 million

acquisition of Inter Terminals Sweden.

Three Months Ended December 31, 2015 Inter Pipeline also generated record quarterly financial results as FFO* increased $51.7 million or 32.4%, from $159.7

million in the fourth quarter of 2014 to $211.4 million in the fourth quarter of 2015. This increase is largely due to the

same reasons discussed above, with the exception of slightly higher operating results from the NGL extraction business

due to lower operating, fuel and power costs, and the conventional oil pipelines business due to higher midstream

marketing blend margins.

Inter Pipeline’s fourth quarter net income increased $58.4 million from $79.6 million in 2014 to a quarterly record of

$138.0 million in 2015. The increase is due to higher FFO* as discussed above and lower deferred income tax, offset in part

by higher depreciation and amortization expense.

* Please refer to the NON-GAAP AND ADDITIONAL GAAP FINANCIAL MEASURES section


Total dividends to shareholders in the fourth quarter increased 12.0% to $128.7 million, over the same period in 2014, for

the same reasons indicated above. Inter Pipeline’s payout ratio* was 63.8% for the three months ended December 31,

2015, compared to 74.0% for the fourth quarter of 2014.

Inter Pipeline’s total debt outstanding decreased $24.5 million from $4,876.2 million at September 30, 2015 to $4,851.7

million at December 31, 2015. Total debt in each period includes non-recourse debt held at Inter Pipeline (Corridor) Inc. of

$1,549.2 million and $1,536.2 million, respectively.

OUTLOOK Inter Pipeline owns and operates world scale energy infrastructure assets in western Canada and Europe. Our long-term

strategy is to acquire and develop high-quality assets that generate stable and predictable cash flow, while delivering

strong returns to shareholders. In 2015, Inter Pipeline placed into service the majority of its multi-billion dollar pipeline

expansion program and acquired an immediately accretive petroleum and petrochemical storage terminal company in

Sweden, culminating in a year of record financial and operational results. In 2016, our focus remains on leveraging value

from our strategically located and diversified asset base, controlling our costs and capturing additional growth

opportunities.

Inter Pipeline’s $260 million capital program in 2016 will focus primarily on our conventional oil gathering and oil sands

transportation businesses. As a result of the increased mainline capacity provided by recent expansion projects, Inter

Pipeline is well positioned to pursue future growth projects in a capital-efficient manner. Organic growth projects are

expected to account for approximately $200 million, with an additional $60 million invested in sustaining capital* projects

across Inter Pipeline’s four business segments and corporate requirements.

Our oil sands transportation pipeline systems are anchored by long-term commercial arrangements with creditworthy

counterparties and benefitted from record average daily throughput volumes in 2015. Inter Pipeline has over 2.5 million

b/d of installed pipeline capacity on its three major pipeline systems. This includes approximately 1.2 million b/d of

bitumen blend capacity on the Cold Lake system, 865,000 b/d of diluent capacity on the Polaris system and 465,000 b/d of

bitumen blend capacity on the Corridor pipeline system. Ultimate throughput capacities of 1.9 million b/d, 1.3 million b/d

and 1.4 million b/d on the Cold Lake, Polaris and Corridor systems, respectively, can be achieved through the addition of

pump stations and associated infrastructure. Approximately $55 million will be invested in this business segment in 2016

and will focus primarily on the construction of new diluent receipt and bitumen blend delivery connections. Inter Pipeline

will also continue to aggressively pursue opportunities to utilize available excess capacity.

In the conventional oil pipelines segment, the outlook remains positive, despite recent crude oil price volatility. Inter

Pipeline expects to invest approximately $100 million in growth capital* in this business segment in 2016. Demand for

transportation services in low cost basins continues to attract new pipeline connection and storage opportunities. In July

2015, Inter Pipeline commissioned a $112 million expansion of our Mid-Saskatchewan pipeline system that will continue to

benefit from increased regional production in the Viking light oil play arising from horizontal drilling and multi-stage

hydraulic fracturing completion technologies. To further capture increasing volumes, Inter Pipeline commenced



construction of a 400,000 barrel crude oil storage expansion project at the Kerrobert terminal. This $65 million project,

which is expected to be ready for service in the latter half of 2016, will support both operational and merchant storage

opportunities on the Mid-Saskatchewan pipeline system. Additional growth capital* in 2016 will be spent on the

construction of new oil battery connections and expand storage capacity for our Bow River, Central Alberta and Mid-

Saskatchewan pipeline systems.

Inter Pipeline’s European bulk liquid storage business segment diversifies our portfolio by both geography and market. It

also provides Inter Pipeline with stable fee-based cash flow, access to long-life infrastructure assets and an established

regulatory environment. In Europe, there continues to be increased demand for strategic chemical and commodity based

storage services. In order to accommodate part of this demand, Inter Pipeline expects to invest approximately $40 million

of growth capital* in 2016 constructing new tanks and associated facilities.

In 2015, Inter Pipeline acquired four coastal and petrochemical storage terminals in Sweden for $131 million to increase

our European bulk liquid storage capacity by 40% to approximately 27 million barrels. This acquisition along with stronger

contango pricing relationships for certain petroleum products drove overall utilization rates higher, averaging 94% in 2015,

compared to 79% in 2014.

Inter Pipeline’s NGL extraction business is comprised of three straddle plants that are among the largest in North America.

The Cochrane and Empress plants are strategically located on Alberta’s major natural gas export pipeline systems and

processed 2.7 billion cubic feet per day of natural gas in 2015. In 2016, Inter Pipeline expects to invest approximately $5

million to improve efficiency and reliability at our straddle plants.

Inter Pipeline continues to maintain a strong balance sheet with significant liquidity available on our $1.25 billion

committed credit facility. Financial flexibility is important to maintain in turbulent economic conditions in order to

facilitate the funding of our growth capital expenditure* program and other future initiatives. As at December 31, 2015,

Inter Pipeline had $586 million of available capacity on its revolving credit facility. Inter Pipeline also ended the year with a

consolidated net debt to total capitalization ratio* of 52.8%, which is within management’s targeted level of 50% to 55%.

As a result of our strong financial position and the stable nature of our business, Inter Pipeline remains committed to

maintaining our investment grade credit ratings. Standard & Poor’s (S&P) and DBRS Limited (DBRS) have assigned Inter

Pipeline credit ratings of BBB+ and BBB (high), respectively, each with a stable trend. Inter Pipeline (Corridor) Inc. has

investment grade credit ratings of A (stable outlook) from S&P and DBRS and A2 (stable outlook) from Moody’s Investors

Service (Moody’s).

Inter Pipeline’s outlook remains positive, even in a lower commodity price environment. The FFO* that underpins our

monthly dividend is stable, diversified and largely supported by investment grade counterparties. Our extensive energy

infrastructure base is well positioned to compete for future, accretive growth opportunities both locally and

internationally. With a strong balance sheet and proven operations and project management capabilities, Inter Pipeline is

well positioned to continue to generate long-term positive results for our shareholders.



RESULTS OF OPERATIONS Oil Sands Transportation Business Segment

Three Months Ended December 31 Years Ended December 312015 2014 % change 2015 2014 % change

565.4 546.0 3.6 561.4 504.1 11.4 378.8 360.8 5.0 346.0 348.3 (0.7)

Polaris 167.6 117.1 43.1 138.7 60.5 129.3 1,111.8 1,023.9 8.6 1,046.1 912.9 14.6

213.4$ 140.5$ 51.9 768.7$ 476.7$ 61.3 35.3$ 28.2$ 25.2 132.1$ 117.0$ 12.9

157.8$ 97.2$ 62.3 569.1$ 306.1$ 85.9

19.6$ 123.0$ 146.4$ 1,128.3$ 0.3 0.2 1.1 0.2

19.9$ 123.2$ 147.5$ 1,128.5$

Corridor

Revenue(1)

Operating expenses(1)


(millions)

Funds from operations(1)(2)

Volumes (000s b/d)Cold Lake (100% basis)

Growth(2)

Sustaining(2)

(1) For the three month period and year ended December 31, 2015, Cold Lake pipeline system includes the following amounts relating to non-controlling

interest: revenue - $12.8 million and $51.5 million ($6.3 million and $25.6 million in 2014), respectively; operating expenses - $2.8 million and $9.8 million ($1.9 million and $8.8 million in 2014), respectively; FFO(2) - $9.8 million and $41.0 million ($4.4 million and $16.8 million in 2014), respectively; and capital expenditures - $1.0 million and $8.3 million ($3.4 million and $52.6 million in 2014), respectively.


The oil sands transportation business segment is comprised of the Cold Lake, Corridor and Polaris pipeline systems that

transport petroleum products and provide related blending and handling services in Alberta.

The Cold Lake pipeline system is a bitumen blend and diluent pipeline system that transports diluted bitumen from the

Cold Lake oil sands area of Alberta to delivery points in the Hardisty and Edmonton areas. Inter Pipeline owns an 85%

interest in the Cold Lake pipeline system.

The Corridor pipeline system is comprised of a bitumen blend pipeline, a diluent delivery pipeline, a feedstock pipeline and

two products pipelines. It transports diluted bitumen produced from the Muskeg River and Jackpine Mines near Fort

McMurray, Alberta to the Scotford upgrader located northeast of Edmonton, Alberta as well as feedstock and upgraded

products between the Scotford upgrader and certain pipeline terminals in Edmonton, Alberta. Corridor is the sole

transporter of diluted bitumen produced by the Athabasca Oil Sands Project.

The Polaris pipeline system is comprised of a 12-inch diameter diluent pipeline that commenced commercial operations in

August 2012 and a newly constructed 30-inch diameter diluent pipeline that commenced commercial operations in July

2014. The Polaris pipeline system currently provides diluent transportation service from a diluent receipt point in the area

north east of Edmonton to Imperial’s Kearl, Husky’s Sunrise, Suncor’s oil sands, Canadian Natural Resources (CNR) Kirby

South, Athabasca Oil Corporation’s (AOC) Hangingstone and FCCL Partnership’s (FCCL), a business venture between

Cenovus Energy and ConocoPhillips, Foster Creek and Christina Lake oil sands projects.

See the Description of the Business section of the Annual Information Form for further information about the oil sands

transportation business.


Volumes Oil sands transportation volumes averaged 1,111,800 b/d in the fourth quarter, an increase of 8.6% or 87,900 b/d and

averaged 1,046,100 b/d for the full year in 2015, an increase of 14.6% or 133,200 b/d, over the comparable periods in

2014.

Cold Lake pipeline system volumes increased 19,400 b/d or 3.6% in the current quarter and 57,300 b/d or 11.4% for the

full year in 2015, over the same periods in 2014. The volume increase stemmed from incremental production at CNR’s

Kirby South and Wolf Lake facilities, and Imperial’s Cold Lake oil sands development; volumes also increased on an annual

basis from FCCL’s Foster Creek expansion which began shipments in September 2014. Volumes on the Cold Lake pipeline

system typically fluctuate with the timing of steam injection cycles associated with certain shippers’ production processes;

however volume growth is anticipated over the long-term, which is consistent with shippers’ published forecasts.

Fourth quarter volumes on the Corridor pipeline system increased 18,000 b/d in 2015, over 2014, primarily due to higher

shipments from the Muskeg River mine. Annual volumes on the Corridor pipeline system decreased 2,300 b/d in 2015,

over 2014, as a result of maintenance activities at the Scotford upgrader in the second quarter of 2015.

Polaris pipeline system volumes increased 50,500 b/d in the fourth quarter of 2015, compared to the same period in 2014,

largely due to increased diluent deliveries for Imperial’s Kearl expansion beginning in the third quarter of 2015, as well as

incremental deliveries to CNR’s Kirby South, Husky’s Sunrise and Suncor’s oil sands facilities. Annual volumes on the Polaris

pipeline system increased 78,200 b/d in 2015, over 2014, for the same reasons mentioned above, as well as incremental

diluent deliveries to FCCL’s Foster Creek and Christina Lake facilities.

Revenue The oil sands transportation business earns revenue for the transportation of petroleum products which are underpinned

by a range of long-term cost-of-service contracts as defined in the adjusted EBITDA by contract type disclosure in the NON-

GAAP AND ADDITIONAL GAAP FINANCIAL MEASURES section.

In the three months and year ended December 31, 2015, revenue from the oil sands transportation business increased

51.9% or $72.9 million to $213.4 million and 61.3% or $292.0 million to $768.7 million, respectively, over the same periods

in 2014. This includes approximately $21 million and $11 million for the three months and year ended 2015, respectively,

of one-time revenue adjustments primarily related to capital fee payments on the Polaris and Cold Lake pipeline systems

and a change in accounting policy.

Revenue in the three month period and year ended December 31, 2015 from the Cold Lake pipeline system increased

$42.9 million and $172.5 million, respectively, over the comparable periods in 2014. These increases are primarily due to

FCCL capital fee revenue for blend transportation service on the Cold Lake mainline expansion, which entered into

commercial service in January of 2015, as well as higher operating cost recoveries.

In the three months and year ended December 31, 2015, revenue from the Corridor pipeline system decreased $2.9

million and $9.6 million, respectively, compared to the same periods in 2014. Revenue was impacted by a lower return on

debt from a decline in interest rates, a lower return on equity due to a decrease in the long-term Government of Canada

(GOC) benchmark bond interest rate, the declining nature of Corridor’s rate base and lower operating cost recoveries.

Revenue from the Polaris pipeline system increased $32.9 million in the current quarter and $129.1 million in the full year

of 2015, over the same periods in 2014. The increase is largely due to FCCL capital fee revenue for diluent transportation

service on the Polaris pipeline expansion entering commercial service in stages in the third quarter of 2014 and the first


quarter of 2015. Revenue also increased due to incremental revenue from Imperial’s Kearl expansion service beginning in

June 2015, higher capital fee revenue from Husky’s Sunrise and Suncor’s oil sands projects, and from AOC Hangingstone

which began in May 2015, as well as higher operating recoveries.

Operating Expenses Operating expenses in the oil sands transportation business segment typically have a limited impact on Inter Pipeline’s

FFO*, as substantially all operating expenditures are recovered from the shippers on the Cold Lake, Corridor and Polaris

pipeline systems. Operating expenses from the oil sands transportation business increased in the fourth quarter and full

year of 2015 by $7.1 million and $15.1 million, respectively, over the comparable periods in 2014.

Cold Lake pipeline operating expenses increased $3.9 million in the fourth quarter and $2.8 million in the full year of 2015,

compared to the same periods in 2014. These increases are largely due to incremental general operating costs, insurance,

property tax, and fuel and power costs associated with the Cold Lake mainline expansion.

On the Corridor pipeline system operating costs increased $0.1 million in the current quarter largely due to higher integrity

and general operating costs, substantially offset by lower remediation costs, compared to the same period in 2014.

Operating costs for the full year in 2015 increased $0.9 million over 2014, primarily due to higher integrity related costs.

Operating costs on the Polaris pipeline system increased $3.1 million and $11.4 million in the three months and year

ended December 31, 2015, respectively, over the same periods in 2014. Higher operating costs are largely attributable to

the pipeline system expansion resulting in incremental property taxes, fuel and power, employee and general operating

costs.

Capital Expenditures In 2015, the oil sands transportation business incurred total growth capital expenditures* of $146.4 million.

Total growth capital expenditures* in 2015 on the Cold Lake pipeline system were $55.5 million, of which approximately

$42 million relates to Cold Lake pipeline’s estimated $1.7 billion ($1.5 billion - Inter Pipeline’s share) oil sands development

program for transportation services to existing FCCL projects, for a total of approximately $1.5 billion spent to date. In

January 2015, the Cold Lake mainline expansion portion of the project was completed and placed into commercial service

at a cost of approximately $1.3 billion (Inter Pipeline’s share). The remaining expenditures for the Cold Lake pipeline

expansion are associated with the future construction of a bitumen blend connection to FCCL’s Narrows Lake oil sands

project.

The remaining growth capital expenditures* on the Cold Lake pipeline system of approximately $14 million relate to

various other development initiatives, system upgrades and system enhancements.

In 2015, the Polaris pipeline system incurred total growth capital expenditures* of $89.2 million, of which approximately

$36 million relates to its $1.5 billion expansion program, for a total of approximately $1.4 billion spent to date. A second

portion of the Polaris pipeline system expansion was completed and placed into commercial service in the first quarter of

2015, representing approximately $300 million of the Polaris pipeline system’s $1.5 billion estimated total expansion cost.

The remaining expenditures for the Polaris pipeline expansion are associated with the future construction of a diluent

connection to FCCL’s Narrows Lake oil sands project.



Polaris pipeline system growth capital expenditures* in 2015 also include approximately $19 million relating to the

construction of a new delivery connection to AOC’s Hangingstone project, for a total project spend of approximately $31

million. The AOC connection was placed into commercial service in April 2015.

Furthermore, approximately $19 million of the Polaris growth capital expenditures* in 2015 relate to the construction of a

new pipeline lateral and associated facilities connecting the Polaris pipeline system to the JACOS-Nexen Hangingstone

project, for a total project spend to date of approximately $21 million. The total estimated cost of this project is $25

million.

In addition, approximately $5 million of growth capital expenditures* incurred on the Polaris pipeline system in 2015 relate

to the capacity expansion work in support of the second phase of Imperial’s Kearl oil sands project. This project was

completed in June 2015 at a cost of approximately $45 million.

The remaining growth capital expenditures* on the Polaris pipeline system of approximately $10 million relate to various

other development initiatives.

Conventional Oil Pipelines Business Segment Three Months Ended December 31 Years Ended December 31

Volumes (000s b/d) 2015 2014 % change 2015 2014 % changeBow River 96.3 103.7 (7.1) 99.5 100.9 (1.4) Central Alberta 33.8 36.2 (6.6) 34.1 36.7 (7.1) Mid-Saskatchewan 84.7 73.3 15.6 78.1 67.6 15.5

214.8 213.2 0.8 211.7 205.2 3.2

(millions, except per barrel amount)Revenue 89.0$ 87.1$ 2.2 322.4$ 363.9$ (11.4) Midstream product purchases 20.6$ 22.7$ (9.3) 62.6$ 107.7$ (41.9) Operating expenses 17.0$ 18.7$ (9.1) 65.2$ 65.5$ (0.5) Funds from operations(1) 51.5$ 46.8$ 10.0 194.6$ 191.1$ 1.8 Revenue per barrel(2) 2.90$ 2.93$ (1.0) 2.94$ 2.94$ - Capital expenditures Growth(1) 22.1$ 21.1$ 123.4$ 48.4$ Sustaining(1) 3.1 0.9 7.1 4.3

25.2$ 22.0$ 130.5$ 52.7$ (1) Please refer to the NON-GAAP AND ADDITIONAL GAAP FINANCIAL MEASURES section.

(2) Revenue per barrel represents total revenue of the conventional oil pipelines business segment less midstream marketing revenue, revenue from take-or-pay contracts for volume shortfalls and revenue/expense from over/short volumes, divided by actual volumes.

Inter Pipeline’s conventional oil pipelines business is comprised of the Bow River, Central Alberta and Mid-Saskatchewan

pipeline systems, located in Alberta and Saskatchewan. These pipeline systems provide for the transportation of

petroleum products and related blending and handling services.

See the Description of the Business section of the Annual Information Form for further information about the

conventional oil pipelines business.



Volumes Average conventional oil pipeline volumes increased 1,600 b/d in the current quarter and 6,500 b/d, for the full year of

2015, compared to the same periods in 2014. Mid-Saskatchewan pipeline system volumes increased 11,400 b/d or 15.6%

and 10,500 b/d or 15.5% in the three months and year ended December 31, 2015, respectively, over the same periods in

2014. The volume increase on the Mid-Saskatchewan light oil system was driven by significant increases in regional

production from the Viking light oil play stemming from horizontal drilling and multi-stage hydraulic fracturing completion

technologies, and the completion of several expansion projects in mid-2015. However, Mid-Saskatchewan light oil system

volumes were unfavourably impacted in the third and fourth quarter of 2015 by downstream third party pipeline issues.

Bow River pipeline system volumes decreased 7,400 b/d in the fourth quarter and 1,400 b/d for the full year in 2015, due

to natural production declines and a reduction in producer activity levels as a result of lower commodity prices, compared

to the same periods in 2014. Average volumes on the Central Alberta pipeline system decreased 2,400 b/d and 2,600 b/d

in the three months and year ended December 31, 2015, respectively, compared to the same periods in 2014, as a result

of lower volumes at third party truck terminals.

Revenue The conventional oil pipelines business earns revenue for the transportation of petroleum products in accordance with a

number of long-term and short-term fee-based contracts, while its midstream marketing activities generate revenue under

a number of short-term commodity-based contracts. Please refer to the adjusted EBITDA by contract type disclosure in the

NON-GAAP AND ADDITIONAL GAAP FINANCIAL MEASURES section for further information.

Revenue from the conventional oil pipelines business increased $1.9 million in the current quarter and decreased $41.5

million for the year ended December 31, 2015, compared to the same periods in 2014. Midstream marketing revenue

increased $2.3 million in the fourth quarter due to higher activity, offset in part by a decline in West Texas Intermediate

(WTI) pricing; and decreased $49.9 million for the full year in 2015 due to a decline in WTI pricing, compared to the same

periods in 2014. The blend margin from midstream marketing activities improved in the fourth quarter due to the increase

in revenue and the cost reduction in midstream product purchases as discussed below, while the blend margin for the full

year of 2015 decreased as lower revenue exceeded the cost reduction in midstream product purchases as discussed

below. Transportation revenue decreased $0.4 million in the current quarter largely due to lower volumes on the Bow

River and Central Alberta pipeline systems. Transportation revenue increased $8.4 million in the full year of 2015 primarily

due to higher volumes shipped on the Mid-Saskatchewan pipeline system, over the same period in 2014.

Midstream Product Purchases In the three months and year ended December 31, 2015, midstream product purchases decreased by $2.1 million and

$45.1 million, respectively, compared to the same periods in 2014, primarily as a result of lower product pricing.

Operating Expenses In the current quarter, operating expenses in the conventional oil pipelines business decreased $1.7 million largely due to

lower remediation costs and various cost optimization initiatives. 2015 annual operating costs decreased $0.3 million

largely due to lower fuel and power costs and cost optimization initiatives, compared to the same period in 2014.


Capital Expenditures In 2015, the conventional oil pipelines business incurred total growth capital expenditures* of $123.4 million.

Approximately $77 million relates to the $112 million expansion of the Mid-Saskatchewan pipeline system involving the

construction of over 50 km of new mainline pipe, 40 km of new pipeline laterals and associated pumping and metering

facilities, which was completed in July 2015. Also included in growth capital expenditures* in 2015 are approximately $20

million related to the 400,000 barrel crude oil storage expansion project at the Kerrobert Terminal on the Mid-

Saskatchewan pipeline system, with a total estimated cost of the project of $65 million. The remaining growth capital

expenditures* of approximately $26 million relate to other third party connections, as well as various system

enhancements.

Bulk Liquid Storage Business Segment Three Months Ended December 31 Years Ended December 312015 2014 % change 2015 2014 % change

Utilization 97% 84% 15.5 94% 79% 19.0

64.8$ 39.5$ 64.1 214.4$ 167.1$ 28.3 31.8$ 21.5$ 47.9 97.2$ 76.0$ 27.9

Funds from operations(1) 28.2$ 15.8$ 78.5 98.3$ 75.4$ 30.4

10.0$ 4.9$ 25.0$ 12.7$ 5.4 5.4 15.3 21.2

15.4$ 10.3$ 40.3$ 33.9$

Growth(1)

(millions)

Sustaining(1)

RevenueOperating expenses

Capital expenditures


Inter Pipeline operates a bulk liquid storage business branded as Inter Terminals with operations in the United Kingdom

(UK), Germany, Ireland, Denmark and Sweden. Inter Terminals represents one of the largest independent bulk liquid

storage businesses in Europe, with a combined storage capacity of approximately 27 million barrels located across 16

terminals. These terminals are strategically located with five terminals at the coastal ports of Immingham, Teesside and

Tyneside in the UK, one terminal on the Shannon estuary in Ireland, two terminals on the Rhine River at Mannheim,

Germany, four deep draft coastal terminals in Denmark located on the Danish Straits and four coastal terminals in Sweden

located along the Baltic Sea and Danish Straits.

See the Description of the Business section of the Annual Information Form for further information about the bulk liquid

storage business.

Utilization Average utilization rates increased in the fourth quarter from 84% in 2014 to 97% in 2015 and annually from 79% in 2014

to 94% in 2015. Higher utilization rates stemmed from stronger contango pricing relationships in certain petroleum

product futures markets, particularly at the Gulfhavn terminal in Denmark. Average utilization rates increased at the

Denmark terminals from 81% to 99% in the fourth quarter of 2014 to 2015 and from 71% to 95% in the full year of 2014 to

2015, respectively.



Revenue The bulk liquid storage business earns revenue for bulk liquid storage and handling services that are underpinned by a

range of long-term and short-term fee-based contracts. Please refer to the adjusted EBITDA by contract type disclosure in

the NON-GAAP AND ADDITIONAL GAAP FINANCIAL MEASURES section for further information.

Bulk liquid storage revenue increased $25.3 million and $47.3 million in the three months and year ended December 31,

2015, respectively, over the same periods in 2014. The increase is largely due to the acquisition of Inter Terminals Sweden

in June 2015, contributing revenue of $15.8 million in the fourth quarter and $30.6 million in the full year of 2015.

Revenue also increased as a result of higher utilization and activity levels at the Gulfhavn, Stigsnaes and Ensted terminals

in Denmark. Foreign currency translation adjustments favourably impacted revenue by $3.3 million in the fourth quarter

and $4.9 million for the full year in 2015, compared to the same periods in 2014. Revenue for full year of 2015 was also

impacted by lower business interruption proceeds relating to flooding at the Immingham and Riverside terminals, lower

non-recurring contract termination fees, and a decrease in heating and storage revenue mainly at the UK terminals. FFO*

for 2015 was also impacted by a contract termination in the first quarter of 2015 which included the release of long-term

deferred revenue, decreasing FFO* by $2.9 million.

See the Foreign Exchange Rates section below for further information on changes in rates.

Foreign Exchange Rates

Three Months Ended December 31 Years Ended December 312015 2014 % change 2015 2014 % change

1.4609$ 1.4186$ 3.0 1.4185$ 1.4671$ (3.3) 2.0253$ 1.7974$ 12.7 1.9542$ 1.8190$ 7.4

(dollars)Euro/CADPound Sterling/CAD

Operating Expenses Operating costs in the bulk liquid storage business increased $10.3 million and $21.2 million in the three months and year

ended December 31, 2015, respectively, over the comparable periods in 2014. The inclusion of operating costs from Inter

Terminals Sweden was the primary driver for the increases, which was partially offset by lower flood related costs at the

Immingham and Riverside terminals. Foreign currency translation adjustments increased operating expenses by $2.1

million in the fourth quarter and $2.9 million in 2015, compared to the same periods in 2014.

Capital Expenditures The bulk liquid storage business incurred $25.0 million of growth capital expenditures* in 2015, largely related to a number

of tank life extensions and tank modification projects. Approximately $6 million of growth capital expenditures* also relate

to the construction of six stainless steel tanks at a German terminal, with a total estimated project cost of $9 million.

In 2015, the bulk liquid storage business also incurred $15.3 million in sustaining capital expenditures* which include,

environmental performance enhancement initiatives, terminal infrastructure and safety improvement projects, and flood

related expenditures at the Riverside terminal.



Acquisition of Inter Terminals Sweden On June 10, 2015, Inter Pipeline completed the acquisition of four petroleum and petrochemical storage terminals in

Sweden from a subsidiary of Koninklijke Vopak N.V. The acquisition was valued at approximately $130.9 million, less

closing adjustments for working capital and debt, for cash consideration of $128.3 million and was funded from Inter

Pipeline’s syndicated credit facility.

Operating results for Inter Terminals Sweden have been included in the consolidated financial statements since June 11,

2015. Inter Terminals Sweden contributed $30.6 million and $5.4 million to revenue and net income, respectively, from

the date of acquisition to December 31, 2015. If the acquisition had taken place on January 1, 2015, for the year ended

December 31, 2015, management estimates that Inter Terminals Sweden would have contributed $50.8 million to revenue

and $6.7 million to net income.

The acquisition was accounted for by the acquisition method as at the closing date of June 10, 2015. Determinations of fair

value often require management to make assumptions and estimates about future events. Changes in any of the

assumptions or estimates used in determining the fair value of acquired assets and liabilities could impact the carrying

amounts assigned. Inter Pipeline has provisionally allocated the consideration transferred, subject to changes in estimates,

as follows:

Cash 0.6$ Property, plant and equipment 150.4 Non-cash working capital (2.5) Decommissioning obligation (7.9) Deferred income tax liability (12.3)

128.3$

NGL Extraction Business Segment

mmcf/d mmcf/d

Facility Throughput EthanePropane-

plus Total Throughput EthanePropane-

plus TotalCochrane 1,853 38.4 30.0 68.4 1,667 40.6 25.1 65.7 Empress V (100% basis) 837 20.7 11.3 32.0 989 26.0 11.7 37.7 Empress II - - - - - - - -

2,690 59.1 41.3 100.4 2,656 66.6 36.8 103.4

mmcf/d mmcf/d

Facility Throughput EthanePropane-

plus Total Throughput EthanePropane-

plus TotalCochrane 1,799 39.8 28.4 68.2 1,526 40.3 23.8 64.1 Empress V (100% basis) 878 22.3 11.2 33.5 926 22.6 10.9 33.5 Empress II - - - - - - - -

2,677 62.1 39.6 101.7 2,452 62.9 34.7 97.6

(000s b/d)2014

Three Months Ended December 312015 2014

(000s b/d) (000s b/d)

Years Ended December 31

(000s b/d)2015


(millions) 2015 2014 % change 2015 2014 % changeRevenue(1) 88.5$ 123.0$ (28.0) 370.8$ 548.6$ (32.4) Shrinkage gas(1) 43.4$ 71.3$ (39.1) 183.1$ 297.0$ (38.4) Operating expenses(1) 19.9$ 26.9$ (26.0) 86.8$ 109.4$ (20.7) Funds from operations(1)(2) 25.2$ 24.7$ 2.0 100.8$ 142.3$ (29.2) Capital expenditures(1)

Growth(2) 0.9$ 1.3$ 1.5$ 6.3$ Sustaining(2) 0.4 2.5 6.2 5.6

1.3$ 3.8$ 7.7$ 11.9$

Years Ended December 31Three Months Ended December 31

(1) Revenue, shrinkage gas, operating expenses, FFO(2) and capital expenditures for the Empress V NGL straddle plant are recorded based on Inter

Pipeline’s 50% ownership.


Inter Pipeline’s NGL extraction business consists of a 100% ownership interest in the Cochrane and Empress II straddle

plants and a 50% ownership interest in the Empress V straddle plant. The Empress and Cochrane plants are located on the

eastern and western legs, respectively, of the TransCanada Alberta System near export points from Alberta.

See the Description of the Business section of the Annual Information Form for further information about the NGL

extraction business.

Volumes Average natural gas throughput volumes processed at Inter Pipeline’s NGL straddle plants increased 34 million cubic feet

per day (mmcf/d) in the fourth quarter to 2,690 mmcf/d and increased 225 mmcf/d for the full year in 2015 to 2,677

mmcf/d, over the comparable periods in 2014.

At the Cochrane plant average throughput volumes increased 186 mmcf/d in the fourth quarter and 273 mmcf/d for the

full year in 2015, over the same periods in 2014. Throughput volumes at the Cochrane plant are largely impacted by, and

fluctuate with, demand for Canadian natural gas in the United States (US) west-coast region. Ethane deliveries from

Cochrane and Empress V were impacted by third party downstream facility issues which resulted in the partial reinjection

of certain ethane volumes in 2015 and to a lesser extent in 2014.

Throughput volumes at the Empress V plant decreased 152 mmcf/d and 48 mmcf/d in the three months and year ended

December 31, 2015, respectively, compared to the same periods in 2014. No throughput volumes were processed at the

Empress II plant in 2015 or 2014 which does not impact operating results due to cost-of-service commercial arrangements

in place at this plant. At the Empress plants natural gas throughput volumes are dependent on the level of natural gas

exported from Alberta’s eastern border and are reliant on successfully attracting border gas flows to the straddle plants.

Empress V throughput volumes in 2015 were also impacted by planned maintenance outages for 20 days in the second

quarter of 2015 and 7 days in the fourth quarter of 2015; while throughput volumes in 2014 were affected by an

unplanned 16 day maintenance outage in the third quarter of 2014.

Revenue The NGL extraction business earns revenue from the recovery of certain higher value hydrocarbon liquids, namely ethane

and propane-plus, from export-destined natural gas streams pursuant to a combination of commodity-based, fee-based

and cost-of-service contracts. Please refer to the adjusted EBITDA by contract type disclosure in the NON-GAAP AND

ADDITIONAL GAAP FINANCIAL MEASURES section for further information.


For the three months and year ended December 31, 2015, revenue from the NGL extraction business decreased $34.5

million to $88.5 million and $177.8 million to $370.8 million, respectively, compared to the same periods in 2014. Revenue

declined as a result of lower propane-plus and ethane product pricing and a reduction in ethane volumes. Partially

offsetting these decreases were higher propane-plus volumes from the Cochrane plant.

Frac-spread

(dollars) 2015 2014USD/USG (1) CAD/USG (1) USD/USG (1) CAD/USG (1)

Market frac-spread 0.310$ 0.414$ 0.529$ 0.599$ Realized frac-spread 0.317$ 0.423$ 0.540$ 0.612$

(dollars) 2015 2014USD/USG (1) CAD/USG (1) USD/USG (1) CAD/USG (1)

Market frac-spread 0.327$ 0.417$ 0.777$ 0.856$ Realized frac-spread 0.329$ 0.420$ 0.759$ 0.836$

Three Months Ended December 31

Years Ended December 31

(1) The differential between USD/USG and CAD/USG frac-spreads is due to fluctuations in exchange rates between US and Canadian dollars.

Market frac-spread is defined as the difference between the weighted average propane-plus price at Mont Belvieu, Texas

and the monthly index price of AECO natural gas purchased for shrinkage calculated in US dollars per US gallon (USD/USG).

This price is converted to Canadian dollars per US gallon (CAD/USG) based on the average monthly Bank of Canada

CAD/USD noon rate. Realized frac-spread is defined in a similar manner and is calculated on a weighted average basis

using market frac-spread for unhedged production and fixed-price frac-spread prices for any hedged production. Natural

gas purchased for shrinkage is based on the actual combination of the monthly index and daily price of AECO paid.

Propane-plus market price differentials, natural gas transportation and extraction premium costs have not been significant

historically, and therefore are not included in the calculation of realized frac-spread. See the RISK MANAGEMENT AND

FINANCIAL INSTRUMENTS section for further discussion of frac-spread hedges.

Realized frac-spreads decreased in the fourth quarter from $0.54 USD/USG in 2014 to $0.32 USD/USG in 2015 and for the

full year from $0.76 USD/USG in 2014 to $0.33 USD/USG in 2015. The 5-year and 15-year simple average market frac-

spreads at December 31, 2015 were $0.85 USD/USG and $0.59 USD/USG, respectively.

Shrinkage Gas Shrinkage gas represents natural gas bought by Inter Pipeline to replace the heat content of liquids extracted from natural

gas processed at the straddle plants. The price for shrinkage gas is based on a combination of daily and monthly index

AECO natural gas prices. Shrinkage gas expense decreased in the three months and year ended December 31, 2015 by

$27.9 million and $113.9 million, respectively, compared to the same periods in 2014. The decrease in the current quarter

is due to lower AECO natural gas prices and NGL volumes, while the annual decrease is due to lower AECO natural gas

prices, offset in part by higher NGL volumes. Weighted average monthly AECO prices* decreased in the fourth quarter

from $3.80 per gigajoule (GJ) in 2014 to $2.51/GJ in 2015 and annually from $4.19/GJ in 2014 to $2.62/GJ in 2015.

* Weighted average price calculated from one-month spot prices at AECO as reported in the Canadian Gas Price Reporter.


Operating Expenses Operating expenses in the NGL extraction business decreased $7.0 million and $22.6 million in the three months and year

ended December 31, 2015, respectively, compared to the same periods in 2014. These decreases are due to lower fuel and

power costs resulting from a decline in power and natural gas pricing and a reduction in general operating and

maintenance costs resulting from improved equipment reliability and various cost optimization initiatives. Average Alberta

power pool prices decreased in the fourth quarter from $30.47/MWh in 2014 to $21.19/MWh in 2015 and for the full year

from $49.42/MWh in 2014 to $33.34/MWh in 2015.

Capital Expenditures In 2015, the NGL extraction business incurred total growth capital expenditures* of $1.5 million largely related to plant and

equipment upgrades at the Cochrane plant. The NGL extraction business also incurred total sustaining capital

expenditures* of $6.2 million in 2015, relating to upgraded processing equipment and infrastructure at the Cochrane plant.

Other Expenses

December 31 December 312015 2014 2015 201443.0$ 31.2$ 187.4$ 115.0$ 52.6 39.7 188.4 142.8 38.5 27.5 142.1 93.6 15.1 19.7 63.0 85.9

0.6 2.9 5.6 (2.1)

(0.1) 0.3 (0.2) (1.0)

Years EndedThree Months Ended

General and administrative

(millions)Provision for income taxes

Loss (gain) on disposal of assetsUnrealized change in fair value of derivative financial instruments

Depreciation and amortizationFinancing charges

Income Taxes In the three months and year ended December 31, 2015, consolidated income tax expense increased $11.8 million to

$43.0 million and $72.4 million to $187.4 million, respectively, over the same periods in 2014. The increase in the fourth

quarter is primarily due to higher consolidated income before income taxes. The increase for 2015 is primarily due to the

Alberta tax rate increase that resulted in an increase in deferred tax expense of $35.9 million, as well as higher

consolidated income before income taxes.

Depreciation and Amortization In the three months and year ended December 31, 2015, depreciation and amortization of tangible and intangible assets

increased $12.9 million and $45.6 million, respectively, over the comparable periods in 2014. These increases are primarily

due to depreciation of new assets now in service, as well as accelerated amortization of certain intangible assets in the

NGL extraction business.



Financing Charges

December 31 December 312015 2014 2015 20148.4$ 10.2$ 35.0$ 37.9$

- 1.3 - 14.5 1.9 2.6 7.6 10.1

Interest on Medium-Term Notes Series 1 to 7 23.5 21.5 92.3 73.9 33.8 35.6 134.9 136.4

2.6 (10.1) 0.7 (49.3)

0.9 0.9 3.3 3.8

1.2 1.1 3.2 2.7 38.5$ 27.5$ 142.1$ 93.6$

Three Months Ended Years Ended

Interest on loan payable to private placement noteholdersInterest on Corridor Debentures

Total interest

Amortization of transaction costs on long-term debt, short-term debt and commercial paperAccretion of provisions and pension plan funding charges

(millions)Interest on credit facilities

Total financing charges

Capitalized interest

Total financing charges increased $11.0 million in the fourth quarter and $48.5 million in the full year of 2015, compared to

the same periods in 2014.

In the three months and year ended December 31, 2015, capitalized interest decreased $12.7 million and $50.0 million,

from the same periods in 2014, primarily due to the completion of major components of the Polaris pipeline and Cold Lake

pipeline system expansions.

Interest on medium-term notes increased $2.0 million in the fourth quarter and $18.4 million year to date in 2015, over

the same periods in 2014, primarily due to the timing of issuance of Series 5 and 6 on May 30, 2014 and Series 7 on March

23, 2015.

Interest on credit facilities decreased $1.8 million and $2.9 million in the fourth quarter and full year of 2015, respectively

due to a decline in weighted average short-term interest rates and lower standby fees, offset in part by higher average

debt levels, compared to the same periods in 2014.

In the three months and year ended December 31, 2015, interest on the loan payable to private placement noteholders

decreased $1.3 million and $14.5 million, respectively, from the comparable periods in 2014, as the loan matured on

October 28, 2014 and was repaid.

Interest on Corridor debentures decreased $0.7 million in the current quarter and $2.5 million for the full year of 2015,

compared to the same periods in 2014, as Corridor’s $150 million Series B debentures matured and was repaid on

February 2, 2015.

Amortization of transaction costs on long-term debt, short-term debt and commercial paper was consistent in the fourth

quarter of 2015 and 2014 and decreased $0.5 million for the year in 2015, compared to the same period in 2014, due to

the timing of debt maturities offset in part by medium-term note issuances discussed above.

In the three months and year ended December 31, 2015, accretion of provisions and pension plan funding charges

increased $0.1 million and $0.5 million, respectively, over the same periods in 2014, as a result of changes in discount rates

for environmental provisions.

See the LIQUIDITY AND CAPITAL RESOURCES section for further information about Inter Pipeline’s debt facilities.


General and Administrative

December 31 December 312015 2014 2015 201412.8$ 16.2$ 52.4$ 74.5$

2.3 3.5 10.6 11.4 15.1$ 19.7$ 63.0$ 85.9$

Years EndedThree Months Ended

(millions)CanadaEurope

Canadian general and administrative expenses decreased $3.4 million and $22.1 million in the three months and year

ended December 31, 2015, respectively, compared to the same periods in 2014. The decrease is primarily due to a

reduction in employee costs largely resulting from lower long-term incentive plan expense stemming from a decrease in

Inter Pipeline’s share price. In addition, annual employee costs were also lower due to the inclusion of a one-time key

management personnel contract renegotiation in the first quarter of 2014.

European general and administrative costs decreased $1.2 million in the fourth quarter largely due to lower acquisition

related costs; and decreased $0.8 million for the full year of 2015, primarily due to lower employee costs offset in part by a

foreign currency loss realized in the first quarter of 2015, compared to the same periods in 2014.

Loss on Disposal of Assets Inter Pipeline recorded a loss on disposal of assets of $0.6 million in the current quarter largely relating to the disposal of

various equipment in the bulk liquid storage business. Inter Pipeline’s loss on disposal of assets of $5.6 million for the full

year of 2015 also includes the sale and disposal of various equipment and line fill from the oil sands transportation and

NGL extraction businesses, which was offset in part from proceeds received earlier in 2015 for asset damage due to

flooding that occurred at Inter Terminals’ Riverside terminal in late 2013.

Unrealized Change in Fair Value of Derivative Financial Instruments The change in fair value of Inter Pipeline’s derivative financial instruments increased net income by $0.1 million in the

current quarter and by $0.2 million for the full year in 2015, due to the change in fair value of electricity price swaps.

See the RISK MANAGEMENT AND FINANCIAL INSTRUMENTS section for additional information on Inter Pipeline’s risk

management initiatives.


SUMMARY OF QUARTERLY RESULTS

(millions, except per share and % amounts)

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

FirstQuarter

SecondQuarter

ThirdQuarter

FourthQuarter

RevenueOil sands transportation 105.1$ 102.9$ 128.2$ 140.5$ 177.4$ 182.7$ 195.2$ 213.4$ Conventional oil pipelines 91.2 96.0 89.6 87.1 77.8 74.7 80.9 89.0$ Bulk liquid storage 46.0 40.0 41.6 39.5 48.1 44.4 57.1 64.8$ NGL extraction 168.4 137.0 120.2 123.0 102.5 88.8 91.0 88.5$

410.7$ 375.9$ 379.6$ 390.1$ 405.8$ 390.6$ 424.2$ 455.7$

Funds from operations(1)

Oil sands transportation 63.4$ 63.0$ 82.5$ 97.2$ 130.2$ 135.0$ 146.1$ 157.8$ Conventional oil pipelines 46.0 49.6 48.7 46.8 46.8 46.5 49.8 51.5$ Bulk liquid storage 21.6 18.2 19.8 15.8 20.5 20.6 29.0 28.2$ NGL extraction 48.5 34.7 34.4 24.7 28.7 23.3 23.6 25.2$ Corporate costs (47.8) (33.9) (44.4) (24.8) (49.7) (44.4) (43.3) (51.3)$

131.7$ 131.6$ 141.0$ 159.7$ 176.5$ 181.0$ 205.2$ 211.4$ Per share(1) 0.43$ 0.41$ 0.43$ 0.49$ 0.53$ 0.54$ 0.61$ 0.63$

Net income 89.6$ 85.3$ 95.0$ 79.6$ 122.8$ 73.8$ 128.4$ 138.0$

Net income attributable to shareholders 86.1$ 81.7$ 91.4$ 75.6$ 113.7$ 65.3$ 118.7$ 129.7$ Per share – basic 0.28$ 0.25$ 0.28$ 0.24$ 0.34$ 0.19$ 0.35$ 0.39$ Per share – diluted 0.27$ 0.25$ 0.28$ 0.23$ 0.34$ 0.19$ 0.35$ 0.39$

Dividends to shareholders(2) 99.6$ 103.9$ 104.7$ 114.9$ 121.8$ 123.1$ 123.5$ 128.7$ Per share(2) 0.3225$ 0.3225$ 0.3225$ 0.3525$ 0.3675$ 0.3675$ 0.3675$ 0.3825$

Shares outstanding (basic) Weighted average 309.0 321.6 324.2 325.8 331.5 334.8 335.8 336.3 End of period 320.3 323.0 325.4 326.2 334.2 335.3 336.2 336.4


Growth(1) 544.8$ 244.0$ 256.6$ 150.3$ 132.5$ 67.8$ 43.4$ 52.6$ Sustaining(1) 6.1 10.0 11.7 12.7 9.5 10.0 12.3 27.8

550.9$ 254.0$ 268.3$ 163.0$ 142.0$ 77.8$ 55.7$ 80.4$

Payout ratio(1) 78.0% 81.5% 76.6% 74.0% 73.3% 71.9% 63.6% 63.8%

Total assets 8,307.7$ 8,366.9$ 8,548.2$ 8,647.2$ 8,733.8$ 8,955.5$ 9,010.4$ 9,029.4$ Total debt(4) 4,155.8$ 4,283.8$ 4,396.3$ 4,590.7$ 4,680.7$ 4,865.1$ 4,876.2$ 4,851.7$ Total shareholders’ equity 2,490.4$ 2,521.3$ 2,566.9$ 2,548.1$ 2,737.6$ 2,732.2$ 2,805.4$ 2,821.1$ Enterprise value(1) 13,504.4$ 14,981.6$ 16,223.6$ 16,314.8$ 15,590.4$ 14,487.4$ 13,153.2$ 12,323.7$ Consolidated Net Debt to Total Capitalization(1) 45.0% 48.6% 50.1% 52.2% 51.4% 52.8% 52.7% 52.8%

20152014



(3) Amounts reported on a 100% basis that includes non-controlling interest.

(4) Total debt includes long-term debt, short-term debt and commercial paper before discounts and debt transaction costs.


LIQUIDITY AND CAPITAL RESOURCES Inter Pipeline’s capital management objectives are aligned with its commercial growth strategies and long-term outlook

for the business. The primary objectives are to maintain:

(i) stable dividends to shareholders over economic and industry cycles;

(ii) a flexible capital structure which optimizes the cost of capital within an acceptable level of risk; and

(iii) an investment grade credit rating.

Inter Pipeline’s capital under management includes financial debt and shareholders’ equity. Management may make

adjustments to the capital structure for changes in economic conditions or the risk characteristics of the underlying assets.

To maintain or modify the capital structure, Inter Pipeline may adjust the level of cash dividends paid to shareholders,

issue new common or preferred shares, issue new debt, renegotiate existing debt terms or repay existing debt.

Inter Pipeline maintains flexibility in its capital structure to fund growth capital* and acquisitions through market and

industry cycles. Funding requirements are projected to ensure appropriate sources of financing are available to meet

future financial obligations and capital expenditure programs. Inter Pipeline generally relies on committed credit facilities

and FFO* in excess of dividends to fund capital requirements. At December 31, 2015, Inter Pipeline had access to

committed credit facilities totaling $2.8 billion, of which $749.8 million remained unutilized, and demand facilities totaling

$105.8 million of which $79.0 million remained unutilized. Certain facilities are available to specific subsidiaries of Inter

Pipeline.

On March 10, 2015, Inter Pipeline subsidiaries Inter Terminals Limited and Inter Terminals EOT ApS entered into a Pound

Sterling 20 million demand facility for general corporate and working capital purposes.

Inter Pipeline amended its $1.25 billion syndicated credit facility on December 4, 2015, extending the term for one year

with a revised maturity date of December 4, 2020, and amended certain financial covenants to increase financial flexibility.

For further details please refer to the Financial Covenants section below. On December 14, 2015, Corridor extended the

maturity date of its $1.55 billion syndicated credit facility to December 13, 2019.

Inter Pipeline may also issue equity capital to ensure its balance sheet remains well prepared for expected growth. During

the three months and year ended December 31, 2015, approximately $5.6 million and $93.5 million, respectively, of equity

was issued through the dividend reinvestment plan. Effective August 6, 2015, Inter Pipeline reduced the dividend

reinvestment discount of the Premium DividendTM and Dividend Reinvestment Plan from 2% to 0%.

On March 23, 2015, Inter Pipeline issued $300 million of senior unsecured medium-term notes Series 7 due March 24,

2025 in the Canadian public debt market, which bear interest at a fixed rate of 3.173% per annum, payable semi-annually.

Net proceeds from the issuance were used to repay a portion of Inter Pipeline’s bank indebtedness incurred through

funding its capital expenditure program and for general corporate purposes.

* Please refer to the NON-GAAP AND ADDITIONAL GAAP FINANCIAL MEASURES section Denotes trademark of Canaccord Genuity Corp.


Inter Pipeline has a current short form base shelf prospectus with Canadian regulatory authorities that was filed in

December 2015. Under provisions detailed in the short form base shelf prospectus, Inter Pipeline may offer and issue,

from time to time: (i) common shares; (ii) preferred shares; (iii) debt securities and (iv) subscription receipts (collectively,

the “Securities”) of up to $3.0 billion aggregate of Securities during the 25 month period that the short form base shelf

prospectus is valid. Securities may be offered separately or together, in amounts, at prices and on terms to be determined

based on market conditions at the time of sale and set forth in one or more prospectus supplements. As at December 31,

2015, no Securities have been issued under the base shelf prospectus.

Inter Pipeline may utilize derivative financial instruments to minimize exposure to fluctuating commodity prices, foreign

exchange and interest rates. Inter Pipeline’s market risk management policy defines and specifies the controls and

responsibilities to manage market exposure to changing commodity prices (crude oil, natural gas, NGL and power) and

changes within financial markets relating to interest rates and foreign exchange exposure. Further details of the risk

management program are discussed in the RISK MANAGEMENT AND FINANCIAL INSTRUMENTS section.

Credit Facilities and Debt Outstanding December 31

Recourse Non-recourse 2015 2014

-$ 1,550.0$ 1,550.0$ 1,550.0$ 1,250.0 - 1,250.0 1,250.0 1,250.0 1,550.0 2,800.0 2,800.0

80.8 25.0 105.8 65.0 1,330.8$ 1,575.0$ 2,905.8$ 2,865.0$

Inter Pipeline Ltd.Inter Pipeline syndicated credit facility 664.0$ 686.0$ Medium-Term Notes Series 1 to 7 2,625.0 2,325.0 Inter Terminals demand facility(1) 26.5 -

Inter Pipeline (Corridor) Inc.Corridor syndicated credit facility 1,386.2 1,279.7 Corridor Debentures(4) 150.0 300.0

4,851.7$ 4,590.7$ Total debt outstanding(2)(3)

Corridor syndicated credit facility

Demand facilities(1)(2)

(millions)Credit facilities available

Total debt outstanding(2)

Inter Pipeline syndicated credit facility

(1) Demand facilities consist of: Inter Pipeline’s $40 million demand facility; Corridor’s $25 million demand facility; and Inter Terminals Limited and Inter

Terminals EOT ApS Pound Sterling 20 million demand facility which was entered into on March 10, 2015 and converted at a Pound Sterling/CAD rate of 2.0407 at December 31, 2015.

(2) At December 31, 2015, outstanding Inter Pipeline letters of credit of approximately $0.3 million were not included in total debt outstanding.

(3) Total debt reported in the December 31, 2015 consolidated financial statements of $4,832.7 million, includes long-term debt, short-term debt and commercial paper outstanding of $4,851.7 million less discounts and debt transaction costs of $19.0 million.

(4) On February 2, 2015, Corridor’s $150 million Series B debentures matured and were repaid.


Inter Pipeline’s debt outstanding at December 31, 2015, matures at various dates up to May 2044 as follows:

Amount Rate Maturity dateInter Pipeline Ltd.

Inter Pipeline syndicated credit facility 664.0$ Variable December 4, 2020Medium-Term Notes

Series 1 325.0 4.967% February 2, 2021Series 2 200.0 3.839% July 30, 2018Series 3 400.0 3.776% May 30,2022Series 4 500.0 3.448% July 20, 2020Series 5 500.0 4.637% May 30, 2044Series 6 400.0 CDOR plus 49 bps May 30, 2017Series 7 300.0 3.173% March 24, 2025

Inter Pipeline (Corridor) Inc.Corridor syndicated credit facility 1,386.2 Variable December 13, 2019Corridor Debentures 150.0 4.897% February 3, 2020

Inter Terminals Limited and Inter Terminals EOT ApSPound Sterling 20 million demand facility 26.5 Variable Demand

(millions)

Financial Covenants Inter Pipeline was in compliance with all covenants under its credit facilities and medium-term notes as at December 31,

2015.

The following table provides a listing of the key financial covenants as at December 31, 2015:

Maximum RatioDecember 31

2015Inter Pipeline Ltd.Inter Pipeline syndicated credit facility

Consolidated Net Debt to Total Capitalization(1)(2)(3)(4) 65% 52.8%Medium-Term Notes Series 1 to 7

Funded Debt to Total Capitalization(2)(5)(6) 70% 53.2%

Inter Pipeline (Corridor) Inc.Corridor syndicated credit facilityCorridor Debentures

Rate Base Debt to Rate Base(7)(8) 75% 73.5%

(1) "Consolidated Net Debt" includes the aggregate amount of all debt of the borrower and its restricted subsidiaries, but excludes debt of any unrestricted subsidiary which is not guaranteed by the borrower or any restricted subsidiary, subordinated debt, non-recourse debt and debt attributable to any non-controlling interest, less cash and cash equivalents owned by the borrower and its restricted subsidiaries, but excluding any such cash or cash equivalents owned by an unrestricted subsidiary or attributable to any non-controlling interest, provided that the use or application of such cash and cash equivalents is not encumbered or restricted by contract or regulatory requirements.

(2) Inter Pipeline (Corridor) Inc. is not considered a restricted subsidiary under Inter Pipeline’s syndicated credit facility or medium-term note indenture and, as a result, its debt and assets are excluded from all financial covenant calculations under those agreements.

(3) "Total Capitalization" for Inter Pipeline’s syndicated credit facility covenant is the sum of debt, but excluding non-recourse debt, debt attributable to unrestricted subsidiaries or any non-controlling interest, plus convertible debentures, plus consolidated shareholders’ equity of the borrower, but excluding any shareholders’ equity from or attributable to non-recourse assets, unrestricted subsidiaries or any non-controlling interest, plus a $243.8 million adjustment related to Canadian SIFT legislation.


(5) "Funded Debt" includes long-term debt of the issuer and its restricted subsidiaries, but excluding non-recourse debt, subordinated debt and any obligations of the issuer to a restricted subsidiary or of a restricted subsidiary to the issuer or another restricted subsidiary.

(6) "Total Capitalization" for Inter Pipeline’s medium-term notes covenant is the sum of Funded Debt plus subordinated debt, plus consolidated equity, plus the amount of any minority interests in restricted subsidiaries, plus a $243.8 million adjustment related to Canadian SIFT legislation.

(7) “Rate Base Debt” includes all Corridor debt excluding debt incurred in connection with financing additions to the rate base prior to the time those additions form part of the rate base, debt incurred to fund recoverable expenditures under the Corridor Firm Service Agreement (FSA) and subordinated debt.

(8) “Rate Base” includes the invested capital to bring the asset to service pursuant to the Corridor FSA.


26 INTER PIPELINE

The Corridor pipeline system is operated under the Corridor FSA, which is a long-term cost-of-service contract that

provides for the recovery of debt financing costs, substantially all operating costs, rate base depreciation and taxes, in

addition to providing a return on equity. As a result, Corridor’s FFO* is not impacted by throughput volumes or commodity

price fluctuations. Inter Pipeline actively manages Corridor’s debt level to ensure the actual rate base debt to rate base

ratio is very close to the benchmark criteria (i.e. not more than 75%) to optimize its defined capital structure.

At December 31, 2015, approximately $2,476.7 million or 51.0% of Inter Pipeline’s total debt outstanding was exposed to

variable interest rates. Of this amount $1,386.2 million or 56.0% relates to Corridor debt outstanding and its financing

costs are directly recoverable through the terms of the Corridor FSA. When deemed appropriate, Inter Pipeline may enter

into interest rate swap agreements to manage its interest rate risk exposure.

The following interest coverage* ratio is calculated on a consolidated basis for the twelve month periods ended December

31, 2015 and 2014.

Twelve Months EndedDecember 31

(times) 2015 2014Interest coverage(1)(2) 5.4 3.8


(2) Net income attributable to shareholders plus income taxes and borrowing costs, divided by the sum of borrowing costs, capitalized borrowing costs and any retirement of obligations.

Credit Ratings The following investment grade, long-term corporate credit ratings or senior unsecured debt ratings are maintained by

Inter Pipeline and by Inter Pipeline (Corridor) Inc.

Credit Rating Trend/OutlookInter Pipeline Ltd.

S&P BBB+ StableDBRS BBB (high) Stable

Inter Pipeline (Corridor) Inc.S&P A StableDBRS A StableMoody's A2 Stable



Contractual Obligations, Commitments and Guarantees The following table summarizes Inter Pipeline’s expected capital spending profile and future contractual obligations at

December 31, 2015. Management intends to finance short-term commitments either through existing or renegotiated

credit facilities and FFO* in excess of dividends. Longer term commitments will be funded through Inter Pipeline’s capital

management policies as discussed earlier in the LIQUIDITY AND CAPITAL RESOURCES section.

TotalLess than one

yearOne to five

yearsAfter five

years

Oil sands transportation(2) 350.2$ 56.9$ 249.5$ 43.8$ Conventional oil pipelines 98.5 98.1 0.4 - Bulk liquid storage 38.8 38.8 - - NGL extraction 6.2 6.2 - -

Growth capital funded by Inter Pipeline(2)(3) 493.7 200.0 249.9 43.8 Sustaining capital funded by Inter Pipeline(2)(3) 61.7 61.7 - -

555.4 261.7 249.9 43.8 Total debt(4)(5)(6)

Corridor syndicated credit facility(6) 1,386.2 1,386.2 - - Inter Pipeline syndicated credit facility 664.0 - 664.0 - Corridor Debentures(5) 150.0 - 150.0 - Medium-Term Notes Series 1 to 7 2,625.0 - 1,100.0 1,525.0 Inter Terminals demand facility 26.5 26.5 - -

4,851.7 1,412.7 1,914.0 1,525.0 Other obligations

Operating leases 339.8 25.5 97.9 216.4 Purchase obligations 185.1 20.5 55.2 109.4 Long-term portion of incentive plan 5.7 - 5.7 - Adjusted working capital deficit(3) 51.2 51.2 - -

5,988.9$ 1,771.6$ 2,322.7$ 1,894.6$

Capital expenditure projects(1)(2)(millions)

(1) Capital expenditures classified as “less than one year” represent expected spending in 2016.

(2) Inter Pipeline’s expected growth and sustaining capital(3) spending profile including the 15% non-controlling interest in Cold Lake is $594.0 million.


(4) At December 31, 2015, outstanding Inter Pipeline letters of credit of approximately $0.3 million were not included in total debt outstanding. Total debt reported in the December 31, 2015 consolidated financial statements of $4,832.7 million, includes long-term debt, short-term debt and commercial paper of $4,851.7 million less discounts and debt transaction costs of $19.0 million.

(5) On February 2, 2015, Corridor’s $150 million Series B debentures matured and were repaid.

(6) Principal obligations are related to commercial paper. This amount is fully supported and management expects that it will continue to be supported by Corridor’s fully committed syndicated credit facility that has no repayment requirements until December 2019.



The following future obligations resulting from the normal course of operations will be primarily funded from FFO* in the

respective periods that they become due or may be funded through debt:

(i) Operating leases and purchase obligations represent minimum payment obligations associated with leases and

normal operating agreements for periods up to 2094.

(ii) Working capital deficiencies* arise primarily from capital expenditures outstanding in accounts payable and

accrued liabilities at the end of a period.

(iii) Inter Pipeline has obligations of $18.5 million under its employee long-term incentive plan, of which $12.8

million is included in the working capital deficit*.

(iv) Present value of estimated expenditures expected to be incurred in the longer term on decommissioning of

active pipeline systems, NGL straddle plants and leased bulk liquid storage sites and remediation of known

environmental liabilities is $89.6 million at December 31, 2015. Due to the uncertainty of timing for payment of

these obligations, they were excluded from the table above.

* Please refer to the NON-GAAP AND ADDITIONAL GAAP FINANCIAL MEASURES section * Please refer to the NON-GAAP AND ADDITIONAL GAAP FINANCIAL MEASURES section


DIVIDENDS TO SHAREHOLDERS

(millions, except per share and % amounts) 2015 2014 2015 2014Cash provided by operating activities 233.9$ 166.4$ 760.5$ 571.7$

Net change in non-cash operating working capital (22.5) (6.7) 13.6 (7.7) Less funds from operations(1) attributable to non-controlling interest (9.8) (4.4) (41.0) (16.8)

Funds from operations(1) attributable to shareholders 201.6$ 155.3$ 733.1$ 547.2$

Dividends to shareholders 128.7$ 114.9$ 497.1$ 423.1$

Dividends per share(2) 0.3825$ 0.3525$ 1.4850$ 1.3200$

Payout ratio(1) 63.8% 74.0% 67.8% 77.3%

Three Months EndedDecember 31

Years EndedDecember 31



Inter Pipeline’s goal is to provide shareholders with stable dividends over time. As a result, not all FFO* attributable to

shareholders are distributed to shareholders. A portion is withheld and reinvested in the business to effectively manage its

capital structure, and in particular, debt levels. Inter Pipeline sets dividend levels based on the underlying assumptions in

each year’s annual operating and capital budget and long-term forecast, consistent with its goal to provide shareholders

with stable dividends. Dividends are determined at the discretion of Inter Pipeline’s Board of Directors, subject to certain

legal requirements, and are payable when declared.

FFO* is an additional GAAP financial measure that Inter Pipeline uses in managing its business and in assessing future cash

requirements that impact the determination of future dividends to shareholders. Inter Pipeline expresses FFO* attributable

to shareholders as cash provided by operating activities less net changes in non-cash working capital and FFO* attributable

to non-controlling interest. The impact of net change in non-cash working capital is excluded in the calculation of FFO*

primarily to compensate for the seasonality of working capital throughout the year. Certain Inter Pipeline revenue

contracts dictate an exchange of cash that differs, on a monthly basis, from the recognition of revenue. Within a 12-month

calendar year, there is minimal variation between revenue recognized and cash exchanged. Inter Pipeline therefore

excludes the net change in non-cash working capital in its calculation of FFO* to mitigate its quarterly impact. The intent is

to not skew the results of Inter Pipeline in any quarter for exchanges of cash, but to focus the results on cash that is

generated in any reporting period.



The tables below show Inter Pipeline’s dividends declared relative to cash provided by operating activities and net income

attributable to shareholders for the periods indicated. See the OUTLOOK section of this report and RISK FACTORS section

for further information regarding the sustainability of dividends.

Three Months Ended Years EndedDecember 31 December 31

(millions) 2015 2014 2015 2014Cash provided by operating activities 233.9$ 166.4$ 760.5$ 571.7$ Less cash provided by operating activities attributable to non-controlling interest (10.0) (4.4) (39.4) (25.8) Dividends to shareholders (128.7) (114.9) (497.1) (423.1) Excess 95.2$ 47.1$ 224.0$ 122.8$

Three Months Ended Years EndedDecember 31 December 31

(millions) 2015 2014 2015 2014Net income attributable to shareholders 129.7$ 75.6$ 427.4$ 334.8$ Dividends to shareholders (128.7) (114.9) (497.1) (423.1) Excess (Shortfall) 1.0$ (39.3)$ (69.7)$ (88.3)$ Cash provided by operating activities in all periods was greater than dividends to shareholders plus cash provided by

operating activities attributable to non-controlling interest. Dividends were greater than net income attributable to

shareholders in all periods except for the fourth quarter of 2015; as net income also includes certain non-cash expenses

such as depreciation and amortization, deferred income taxes and unrealized changes in the fair value of derivative

financial instruments.

OUTSTANDING SHARE DATA Inter Pipeline’s outstanding common shares at December 31, 2015 are as follows:

(millions) TotalCommon shares outstanding 336.4

At February 16, 2016, Inter Pipeline had 336.6 million common shares outstanding.

RISK MANAGEMENT AND FINANCIAL INSTRUMENTS Market Risk Management Inter Pipeline may utilize derivative financial instruments to manage liquidity and market risk exposure to changes in

commodity prices, foreign currencies and interest rates. Market risk management strategies are intended to minimize the

volatility of Inter Pipeline’s exposure to commodity price, foreign exchange and interest rate risk to assist with stabilizing

FFO*. Inter Pipeline prohibits the use of derivative financial instruments for speculative purposes. All hedging policies are

authorized and approved by the Board of Directors through Inter Pipeline’s market risk management policy.



Inter Pipeline may enter into the following types of derivative financial instruments: commodity price swap agreements,

foreign currency exchange contracts, power price hedges and heat rate and interest rate swap agreements. The mark-to-

market or fair value of these financial instruments is recorded as an asset or liability and any change in the fair value

recognized as an unrealized change in fair value of these derivative financial instruments in the calculation of net income.

When the financial instrument matures, any realized gain or loss is recorded in net income.

In the following sections, sensitivity analyses are presented to provide an indication of the amount that an isolated change

in one variable may have on net income and are based on long-term debt, short-term debt and commercial paper

outstanding at December 31, 2015. The analyses are hypothetical and should not be considered to be predictive of future

performance. Changes in fair value generally cannot be extrapolated based on one variable because the relationship with

other variables may not be linear. In reality, changes in one variable may magnify or counteract the impact of another

variable which may result in a significantly different conclusion.

NGL Extraction Business FRAC-SPREAD RISK MANAGEMENT

Inter Pipeline is exposed to frac-spread risk which is the difference between the weighted average propane-plus price at

Mont Belvieu, Texas and the monthly index price of AECO natural gas purchased for shrinkage calculated in USD/USG.

Derivative financial instruments may be utilized to manage frac-spread risk. As at December 31, 2015, there are no frac-

spread hedges outstanding.

POWER PRICE RISK MANAGEMENT

Inter Pipeline may use derivative financial instruments to manage power price risk in its NGL extraction and conventional

oil pipelines business segments. When deemed appropriate, Inter Pipeline enters into financial heat rate swap and power

price swap contracts to manage power price risk exposure in these businesses. As at December 31, 2015, there are no

electricity price swap or heat rate price swap agreements outstanding.

Bulk Liquid Storage Business FOREIGN EXCHANGE RISK MANAGEMENT

Inter Pipeline is exposed to currency risk resulting from the translation of assets and liabilities of its European bulk liquid

storage operations and transactional currency exposures arising from purchases in currencies other than Inter Pipeline’s

functional currency, the Canadian dollar. Transactional foreign currency risk exposures have not been significant

historically, therefore are generally not hedged; however, Inter Pipeline may decide to hedge this risk in the future. As at

December 31, 2015, there are no foreign currency exchange hedges outstanding.

Corporate INTEREST RATE RISK MANAGEMENT

Inter Pipeline’s exposure to interest rate risk primarily relates to its long-term debt obligations and fair value of its floating-

to-fixed interest rate swap agreements. Inter Pipeline manages its interest rate risk by balancing its exposure to fixed and

variable rates while minimizing interest costs. When deemed appropriate, Inter Pipeline may enter into interest rate swap

agreements to manage its interest rate price risk exposure. As at December 31, 2015, there are no interest rate hedges

outstanding.


Based on the variable rate obligations outstanding at December 31, 2015, a 1% change in interest rates at this date would

have changed interest expense for the three months and year ended December 31, 2015, by approximately $6.1 million

and $24.8 million, respectively, assuming all other variables remain constant. Of these amounts, $3.4 million and $13.9

million for the three months and year ended December 31, 2015, respectively, relate to Corridor’s syndicated credit facility

and are recoverable through the terms of the Corridor FSA, therefore the after-tax income impact for the three months

year ended December 31, 2015 would be $2.0 million and $8.1 million, respectively.

Credit Risk Inter Pipeline’s credit risk exposure relates primarily to the non-performance of its customers and financial counterparties

holding cash, accounts receivable, and prepaid expenses and other deposits. Credit risk is managed through Inter

Pipeline’s credit management policy, which establishes guidelines for defining and measuring credit risk, determining

credit risk thresholds and monitoring credit risk exposures to counterparties and vendors. The creditworthiness

assessment takes into account available qualitative and quantitative information about the counterparty including, but not

limited to, business performance, financial status and external credit ratings. Depending on the outcome of each

assessment, guarantees or some other form of credit enhancement may be requested as security. Inter Pipeline attempts

to mitigate its exposure by entering into contracts with customers that may permit netting or entitle Inter Pipeline to lien

or take product in kind and/or allow for termination of the contract on the occurrence of certain events of default. Each

business segment monitors outstanding accounts receivable on an ongoing basis. .

Concentrations of credit risk associated with accounts receivable relate to a limited number of principal customers in the

oil sands transportation and NGL extraction business segments, the majority of which are affiliated with investment grade

corporations in the energy and chemical industry sectors. At December 31, 2015, accounts receivable associated with

these two business segments were $130.7 million or 71.4% of total accounts receivable outstanding. Inter Pipeline

believes the credit risk associated with the remainder of accounts receivable is minimized due to diversity across business

segments and customers.

With respect to credit risk arising from cash and cash equivalents, deposits and derivative financial instruments, Inter

Pipeline believes the risk of non-performance of counterparties is minimal as cash and deposits outstanding are

predominantly held with major financial institutions or investment grade corporations.

Inter Pipeline actively monitors the risk of non-performance of its customers and financial counterparties. Accounts

receivable are deemed past due if they are aged greater than 60 days and are considered to be impaired if one or more

events have occurred that would impact the estimated future cash flows of that asset. At December 31, 2015, accounts

receivable outstanding meeting the definition of either past due or impaired are insignificant.

TRANSACTIONS WITH RELATED PARTIES No revenue was earned from related parties in the three and twelve month periods ended December 31, 2015 or 2014.


CONTROLS AND PROCEDURES Disclosure controls and procedures (DC&P) are designed to provide reasonable assurance that all relevant information is

gathered and reported to senior management, including the President and Chief Executive Officer and the Chief Financial

Officer, on a timely basis so that appropriate decisions can be made regarding public disclosure.

Internal controls over financial reporting (ICFR) are a process designed to provide reasonable assurance regarding the

reliability of financial reporting and compliance with GAAP in Inter Pipeline’s consolidated financial statements.

No changes in Inter Pipeline’s ICFR occurred during the period beginning on January 1, 2015 and ended on December 31,

2015 that has materially affected, or is reasonably likely to materially affect, Inter Pipeline’s ICFR.

Management has limited the scope of their design of DC&P and ICFR to exclude controls, policies and procedures of the

recently acquired Inter Terminals Sweden, the results of which are consolidated in Inter Pipeline’s interim financial

statements at June 30 and September 30, 2015 and the audited consolidated financial statements at December 31, 2015.

In June 2015, Inter Pipeline acquired Inter Terminals Sweden. Where possible, Inter Terminals Sweden has adopted Inter

Pipeline’s DC&P and ICFR. For business processes unique to Inter Terminals Sweden, management is committed to

completing DC&P and ICFR before the end of the second quarter of the 2016 fiscal year.

At December 31, 2015, Inter Pipeline’s management, including the President and Chief Executive Officer and the Chief

Financial Officer, conducted an evaluation of the effectiveness of Inter Pipeline’s disclosure controls and procedures and

internal control over financial reporting as defined under National Instrument 52-109 Certification of Disclosure in Issuers’

Annual and Interim Filings. Based on that evaluation, the President and Chief Executive Officer and Chief Financial Officer

concluded that the design and operation of Inter Pipeline’s disclosure controls and procedures and internal control over

financial reporting excluding Inter Terminals Sweden were effective as of December 31, 2015.

CRITICAL ACCOUNTING ESTIMATES The preparation of the annual consolidated financial statements in accordance with IFRS requires management to make

judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of

assets, liabilities, income and expenses. By their nature, these estimates are subject to measurement uncertainty and the

effect on the financial statements of changes in such estimates in future years could be material. Information about critical

judgments, estimates and assumptions in applying accounting policies for these areas is included in the relevant sections

of the notes to the financial statements. Estimates and underlying assumptions are reviewed on an ongoing basis and are

based on management’s experience and other factors, including expectations about future events that are believed to be

reasonable under the circumstances. Revisions to accounting estimates are recognized in the period in which the

estimates are revised and in any future periods affected. Readers should refer to note 3 Summary of Significant Accounting

Policies of the December 31, 2015 annual consolidated financial statements for a list of Inter Pipeline’s significant

accounting policies.

Financial Instruments Inter Pipeline may utilize derivative financial instruments to manage its exposure to market risk relating to commodity

prices, foreign exchange and interest rates. Inter Pipeline has a risk management policy that defines and specifies the


controls and responsibilities associated with those activities managing market exposure to changing commodity prices

(power, crude oil, natural gas, and NGL’s) as well as changes within the financial market relating to interest rates and

foreign exchange exposure for Inter Pipeline. Inter Pipeline’s risk management policy prohibits the use of derivative

financial instruments for speculative purposes. Inter Pipeline also reviews all significant agreements acquired, substantially

modified or entered into for embedded derivatives.

Inter Pipeline has classified its financial instruments as follows: Cash and cash equivalents and the majority of accounts

receivable are classified as cash, loans and receivables; dividends payable, the majority of accounts payable, accrued

liabilities and provisions, and long-term debt, short-term debt and commercial paper are classified as other financial

liabilities.

For further discussion on Inter Pipeline’s derivative financial instruments, see the RISK MANAGEMENT AND FINANCIAL

RESULTS section.

Intangible Assets Inter Pipeline’s intangible assets are amortized using an amortization method and term based on estimates of the useful

lives of these assets. The carrying values of Inter Pipeline’s intangible assets are periodically reviewed for impairment or

whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. This review

requires an estimate of future cash flows to be derived from the utilization of these assets based on assumptions about

future events which may be subject to change depending on future economic or technical developments. A significant

change in these assumptions or unanticipated future events could require a provision for impairment in the future which

would be recorded as a charge against net income.

The Cold Lake Transportation Service Agreement (TSA) intangible asset is the estimated value, using a discounted cash

flow analysis, of the shipping agreement entered into with the Cold Lake founding shippers on the Cold Lake pipeline

system as valued on January 2, 2003. The term of the Cold Lake TSA extends until Cold Lake LP gives notice that it forecasts

it will earn less than $1.0 million of capital fees in the year. This intangible asset is being amortized on a straight-line basis

over 30 years. The remaining amortization period of the Cold Lake TSA is approximately 17 years.

In the bulk liquid storage business, Inter Terminals UK’s intangible assets consist of a customer contract for the storage and

handling of bulk liquid products. This asset is being amortized on a straight-line basis over 30 years. Should the likelihood

of the renewal of the customer contract change, the amortization of the remaining balance would change accordingly. The

remaining amortization period of the customer contract is approximately 20 years.

The NGL extraction business’ intangible assets consist of customer contracts for the sales of ethane and propane-plus and

a patented operational process utilized in one of the straddle plants. Contracts include fee-based contracts, cost-of-service

contracts and commodity-based arrangements. On November 1, 2015, Inter Pipeline revised the estimated useful life of

the NGL extraction business’ customer contract intangible assets from 30 years to a useful life that matches the term of

the existing customer contracts. The revised estimate is more reflective of the evolving industry and economic

environment. The value of these contracts is realized over the term of the agreement, which is the period over which

amortization is being charged using the straight-line method. Should the useful life of a customer contract change, the

amortization of the remaining balance would change accordingly. The average remaining amortization period of the

customer contracts is approximately 8 years. The patent is being amortized on a straight-line basis over the 14 years from


the acquisition of the NGL extraction business on July 28, 2004. The remaining amortization period of the patent is

approximately three years.

Business Combinations Business acquisitions are accounted for using the acquisition method of accounting at the date control of a business is

obtained. The cost of an acquisition is measured as the aggregate of the fair values of the assets given or equity

instruments issued, net of liabilities incurred or assumed. Costs directly associated with the acquisition are expensed. The

consideration transferred of an acquired business is allocated to the identifiable assets acquired and liabilities assumed at

their estimated fair values on the acquisition date. The excess of the consideration transferred over the amount allocated

to net assets is recorded as goodwill. All available information is used to estimate fair values. External consultants are

typically engaged to assist in the fair value determination of identifiable intangible assets and other significant assets or

liabilities. The preliminary allocation of consideration transferred may be adjusted, as necessary, up to one year after the

acquisition closing date due to additional information impacting asset valuation and liabilities assumed.

The allocation process of the consideration transferred involves uncertainty as management is required to make

assumptions and apply judgment to estimates of the fair value of the acquired assets and liabilities, including highest and

best use of assets. Quoted market prices and widely accepted valuation techniques, including discounted cash flows and

market multiple analyses are used to estimate the fair market value of the assets and liabilities, and depreciated

replacement costs are used for the valuation of tangible assets. These estimates include assumptions on inputs within the

discounted cash flow calculations related to forecasted revenues, cash flows, contract renewals, asset lives, industry

economic factors and business strategies.

In certain circumstances Inter Pipeline may also be required to consider the differences between the acquisition of a

business and the purchase of assets depending on the terms of an acquisition contract. Certain judgments can be made in

this determination which could impact the valuation and recognition of assets acquired and liabilities assumed. When an

asset acquisition occurs, the identifiable assets acquired and liabilities assumed are allocated based on the cost of the

acquisition and no goodwill or gain on a bargain purchase is recognized.

Goodwill Inter Pipeline has goodwill in four of its cash generating units (CGU’s): the Corridor and Polaris pipeline systems in the oil

sands transportation business; Inter Terminals UK, Germany and Ireland; and Inter Terminals Denmark in the bulk liquid

storage business. Assets are grouped in CGU’s which are the lowest levels for which there are separately identifiable cash

inflows. Goodwill represents the excess of the consideration transferred over the fair value of the net identifiable assets of

the Corridor; Polaris; Inter Terminals UK, Germany and Ireland; and Inter Terminals Denmark CGU’s. After initial

recognition, goodwill is carried at cost less any write downs for impairment. During each fiscal year and as economic

events dictate, management conducts an impairment test taking into consideration any events or circumstances which

might have impaired the recoverable amount. Inter Pipeline assesses the recoverable amount of the goodwill for

impairment on a fair value less costs of disposal basis by discounting projected future cash flows generated by these assets

at a weighted average cost of capital that reflects the relative risk of the asset. If it is determined that the recoverable

amount of the future cash flows is less than the carrying amount of the assets at the time of assessment, an impairment

loss would be determined by deducting the fair value less costs of disposal on a discounted cash flow basis from the

carrying amount. The recoverable amount of the underlying assets and liabilities were assessed and it was determined that


there was no impairment of goodwill in 2015. Projected future cash flows used in the goodwill assessment represented

management’s best estimate of the future operating performance of these businesses at the current time. A significant

change in these assumptions or unanticipated future events could require a provision for impairment in the future which

would be recorded as a reduction of the carrying value of goodwill with a charge against net income.

Property, Plant and Equipment Calculation of the net book value of property, plant and equipment requires estimates of the useful life of the assets,

residual value at the end of the asset’s useful life, method of depreciation and whether impairment in value has occurred.

A change in any of the estimates would result in a change in the amount of depreciation and a charge to net income

recorded in a period in which the change occurs, with a similar change in the carrying value of the asset on the

consolidated balance sheet.

Property, plant and equipment in the oil sands transportation business consists of pipelines and related facilities.

Depreciation of capital costs is calculated on a straight-line basis over the estimated service life of the assets, which is 80

years. The cost of pipelines and facilities includes all expenditures directly attributable to bringing the pipeline to the

location and condition necessary for its intended use, including costs incurred for system construction, expansion and

betterments until the assets are available for use. Pipeline system costs also include an allocation of directly attributable

overhead costs and capitalized borrowing costs. Capitalization of borrowing costs ceases when the related property, plant

and equipment are substantially complete and ready for its intended productive use.

Pipeline line fill and tank working inventory for the Cold Lake and Corridor pipeline systems represent petroleum based

product purchased for the purpose of charging the pipeline system and partially filling the petroleum product storage

tanks with an appropriate volume of petroleum products to enable a commercial operation of the facilities and pipeline.

The majority of pipeline line fill for the Polaris pipeline system is owned by the shippers directly. The cost of line fill

includes all direct expenditures for acquiring the petroleum based products. These product volumes will be recovered

upon the ultimate retirement and decommissioning of the pipeline system under the terms of the agreement. Cold Lake

and Polaris line fill is carried at cost and Corridor line fill is carried at cost less accumulated depreciation. Proceeds from

the sale of Cold Lake and Polaris line fill will be fully available to Inter Pipeline, whereas proceeds from the sale of

Corridor’s line fill will be used to fund the cost of any decommissioning obligations and to the extent Corridor’s

decommissioning obligations exceed the value of the line fill, Inter Pipeline will be obligated to fund the excess. To the

extent the value of the line fill exceeds the decommissioning obligation; the excess funds will be refunded to the Corridor

shippers. Depreciation of Corridor line fill is calculated on the same basis as the related property, plant and equipment.

On conventional oil pipeline systems expenditures for expansions and betterments are capitalized. Maintenance, pipeline

integrity verification and repair costs are expensed as incurred. Depreciation of pipeline facilities and equipment

commences when the pipelines are available for use. Depreciation of the capital costs is calculated on a straight-line basis

over the estimated 80 year service life of the Bow River pipeline system assets and 30 year service life of the Central

Alberta and Mid-Saskatchewan pipeline system assets. These estimates are connected to the estimated remaining life of

the crude oil reserves expected to be gathered and shipped on these pipeline systems. Pipeline line fill and tank working

inventory for the conventional oil pipeline systems represents petroleum based product purchased for the purpose of

charging the pipeline systems and partially filling the petroleum product storage tanks with an appropriate volume of

petroleum products to enable a commercial operation of the facilities and pipelines. The cost of line fill includes all direct


expenditures for acquiring the petroleum based products. These product volumes will be recovered upon the ultimate

retirement and decommissioning of the pipeline systems and are carried at cost.

The bulk liquid storage business’ property, plant and equipment consist of storage facilities and associated equipment.

Expenditures on expansion and betterments are capitalized, while maintenance and repair costs are expensed as incurred.

Depreciation of the property, plant and equipment is calculated on a straight-line basis over the estimated service life of

the assets, the majority of which ranges from four to 100 years.

Property, plant and equipment of the NGL extraction business are comprised primarily of three straddle plants and

associated equipment. Expenditures on plant expansions, major repairs and maintenance, or betterments are capitalized,

while routine maintenance and repair costs are expensed as incurred. Depreciation of the straddle plants and additions

thereto is charged once the assets are ready for their intended use, and is calculated on a straight-line basis over the 30

year estimated useful life of the assets.

Provisions A provision is recognized when it is determined that an obligation has arisen as a result of a past event, the obligation can

be reliably estimated and it is probable that an outflow of economic benefits will be required to settle the obligation. Inter

Pipeline’s provisions represent legal or constructive obligations associated with decommissioning tangible long-lived assets

at the end of their useful lives and loss contingencies, including environmental remediation costs arising from claims,

assessments, litigation, fines and penalties, and other sources.

Decommissioning obligations and environmental liabilities are calculated based on current price estimates using current

technologies in accordance with current legal or constructive requirements and are adjusted for inflation to when the

decommissioning or remediation activity is anticipated. Where a range of estimates exists, the possible outcomes are

weighted to determine a probable settlement value or the midpoint is used where all outcomes are equally likely. Inter

Pipeline’s decommissioning obligations are expected to occur when the assets are no longer economically viable. The

economic lives of these assets are estimated based on future expectations involving the supply of petroleum, chemical and

other products and demand for certain services and therefore the timing of decommissioning may change significantly in

the future. Actual costs and cash outflows may differ from these estimates due to changes in laws or regulations, timing of

projects, costs and technology. As a result, there could be material adjustments to the provisions established. If the effect

of the time value of money is material, provisions are discounted to their present value using a pre-tax risk-free rate. The

provision will accrete to its full value over time through charges to income, or until Inter Pipeline settles the obligation.

Recoveries from third parties which are virtually certain to be realized are recorded separately and are not offset against

the related provision.

On initial recognition of a decommissioning obligation, an amount equal to the estimated present value of the obligation is

capitalized as part of the cost of the related long-lived asset and depreciated over the asset’s estimated useful life. Any

subsequent changes to the decommissioning cost estimate or discount rate will result in a similar adjustment to the cost of

the related long-lived asset.

Property, plant and equipment related to the oil sands transportation and conventional oil pipelines businesses consist

primarily of underground pipelines and above ground equipment and facilities. The potential cost of future

decommissioning activities is a function of several factors, including regulatory requirements at the time of pipeline

abandonment, the diameter and length of the pipeline and the pipeline's location. Decommissioning requirements can


vary considerably, ranging from purging product from the pipeline, refilling with inert gas and capping all open ends to

removal of the pipeline and reclamation of the right-of-way. Under current regulations, the estimated cost for the

decommissioning obligation include: such activities as purging product from the pipeline, refilling with inert gas and

capping all open ends; and removal of surface facilities and reclamation of the surface facility sites. Decommissioning

obligations for the oil sands transportation and conventional oil pipelines business assets are being accreted over a period

of 40 to 290 years at a rate of 3.1% per annum, based on an estimated discounted value at December 31, 2015 of $13.9

million.

NGL extraction and the bulk liquid storage businesses consist mainly of three NGL straddle plants and sixteen bulk liquid

storage facilities, respectively. Inter Pipeline’s decommissioning obligation represents the present value of the expected

cost to be incurred upon the termination of operations and closure of the NGL straddle plants and leased bulk liquid

storage sites. The estimated costs for decommissioning obligations include such activities as dismantling, demolition and

disposal of the facilities and equipment, as well as remediation and restoration of the sites. Decommissioning obligations

for the NGL extraction business assets are being accreted over a period of 40 years at rates of 3.1% per annum based on

the estimated discount value of $9.6 million at December 31, 2015. The decommissioning obligation for the bulk liquid

storage business assets are being accreted over a range of 30 to 40 years at rates of 3.0% to 3.7% per annum based on the

estimated discounted value at December 31, 2015 of $45.8 million.

Inter Pipeline’s environmental remediation obligation relates to a number of projects which have been identified that Inter

Pipeline is obligated to remediate in future periods. Based on management’s current knowledge of regulations, technology

and current plans to remediate these sites, an estimated discounted liability of $20.3 million has been recognized at

December 31, 2015. Environmental obligations for the conventional oil pipelines and bulk liquid storage businesses are

being accreted over a period of five to ten years at rates of 1.6% to 2.5% and 0.6% to 1.85% per annum, respectively.

Obligations Relating to Employee Pension Plans Inter Pipeline provides retirement benefits for its UK, German and Irish employees under three separate defined benefit

pension plans. These plans provide benefits based primarily on a combination of years of service and an estimate of final

pensionable salary. Inter Pipeline’s policy is to fund the amount of benefit as required by governing legislation.

Independent actuaries perform the required calculations to determine the pension expense in accordance with GAAP. The

most recent actuarial valuations of both the UK and Ireland plans were carried out in 2013, while the German plan was

carried out in 2015.

The cost of pension benefits earned by certain employees in the UK, Germany and Ireland covered by the defined benefit

pension plans is actuarially determined using the projected unit credit method. The determination of benefit expense

requires assumptions such as the expected return on assets available to fund pension obligations, the discount rate used

to measure obligations, expected mortality and the expected rate of future compensation. There is measurement

uncertainty inherent in the actuarial valuation process because the determination of the cost and obligations associated

with employee future benefits requires the use of various assumptions. Actual results will differ from results which are

estimated based on assumptions.

Plan assets are measured at fair value for the purpose of determining the expected return on plan assets. Adjustments for

plan amendments are expensed over the vesting period of the employee benefits. The expected return on Inter Pipeline’s

pension plan assets is calculated using the same interest rate as applied for the purpose of discounting the benefit


obligation. Actuarial gains and losses arise from changes in assumptions and differences between assumptions and the

actual experience of the pension plans. Actuarial gains and losses are recognized in full in the period in which they occur in

other comprehensive income. Past service costs are recognized as an expense on a straight-line basis over the average

period until the benefits become vested. If the benefits have already vested, immediately following the introduction of, or

changes to, a pension plan, past service costs are recognized immediately.

Long-Term Incentive Plans Awards are paid in cash under Inter Pipeline’s Restricted Share Unit Plan (RSUP) and Performance Share Unit Plan (PSUP).

The fair value basis of accounting is used for both plans whereby changes in the liability are recorded in each period based

on the number of awards outstanding and the current market price of Inter Pipeline’s shares plus an amount equivalent to

cash dividends declared to date. Additionally, the valuation of the Performance Share Units (PSUs) incorporates the use of

a performance multiplier, which is determined based on the achievement of two equally weighted, pre-determined, Board

approved performance criteria. The expense is recognized over the vesting periods of the respective awards.

Compensation expense and the long-term incentive liability are adjusted to reflect the use of actual historical forfeiture

rates as well as estimated future forfeiture rates. The market-based value of the award approximates the intrinsic value as

the awards have no exercise price.

Income Taxes

Current Income Taxes Certain of Inter Pipeline’s subsidiaries are taxable corporations in Canada and Europe.

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be

recovered from or paid to taxation authorities. The tax rates and laws used to compute the amount are those that are

enacted or substantively enacted, by the reporting date, in countries where Inter Pipeline and its subsidiaries operate and

generate taxable income. The actual amount of income tax expense is final only when the tax return is filed and accepted

by relevant tax authorities, which occurs subsequent to the issuance of the annual consolidated financial statements.

Management periodically evaluates positions taken in Inter Pipeline’s entity tax returns with respect to situations in which

applicable tax regulations are subject to interpretation. Provisions are established if appropriate.

Current income tax relating to items recognized directly in shareholders’ equity is recognized in equity and not the income

statement.

Deferred Income Taxes Inter Pipeline uses the liability method where deferred income taxes are recognized based on temporary differences

between the carrying amounts of assets and liabilities recorded for financial reporting purposes and their tax bases.

Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the

deductible temporary differences and carried forward tax losses can be utilized. Assessing the recoverability of deferred

taxes requires management to make significant estimates related to expectations of future taxable income. Estimates of

future taxable income are based on forecast FFO* and the application of existing tax laws.



The carrying amount of deferred tax assets is reviewed each reporting date and reduced to the extent that it is no longer

probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized.

Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has

become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred income taxes contain uncertainties because of the assumptions made about when deferred tax assets are likely

to reverse, and a judgment as to whether or not there will be sufficient taxable profits available to offset the tax assets

when they do reverse. This requires assumptions regarding future profitability and is therefore inherently uncertain.

Deferred tax assets and liabilities are measured using the tax rates that have been enacted or substantively enacted at the

reporting date. The tax rates are those that are expected to apply in the year the asset is to be realized or the liability is to

be settled. Future changes in tax laws affecting existing tax rates could limit the ability of Inter Pipeline to obtain tax

deductions in future periods.

Deferred tax relating to items recognized outside net income is recognized outside net income. Deferred tax items are

recognized in correlation to the underlying transaction either in comprehensive income or directly in shareholders’ equity.

Deferred tax assets and liabilities have been offset if a legally enforceable right exists to offset current income tax assets

against current income tax liabilities and the deferred taxes are related to the same taxable entity and the same taxation

authority.

Revenue Recognition Revenue is recorded when services have been performed, the amount of revenue and associated costs can be reliably

measured and when it is probable that consideration will be collected.

The Cold Lake and Polaris pipeline systems revenue is determined by the nature of the contract and is either recognized

ratably over the term of fixed fee arrangements, or as volumes are transported and services are provided to each shipper.

Where transportation agreements involve separately identifiable services, consideration is allocated amongst the services

based on their relative estimated stand-alone selling prices. Long term ship-or-pay agreements, under which shippers are

obligated to pay fixed amounts ratably over the life of the agreement regardless of volumes shipped, may contain make-up

rights. Make-up rights are earned by the shippers when minimum volume commitments are not utilized during the period

but under certain circumstances can be used to offset excess volumes in future periods, subject to expiry periods. Inter

Pipeline recognizes revenues associated with make-up rights at the earlier of when the make-up volume is shipped, the

make-up right expires, or when it is determined that the likelihood that the shipper will utilize the make-up rights is

remote.

Revenue on the Corridor pipeline system is recognized as services are provided in accordance with terms prescribed by the

Corridor FSA with the shippers. Under the terms of the Corridor FSA, revenues are determined by an agreed upon annual

revenue requirement formula which allows for the recovery of prescribed expenditures and costs associated with the

operation of the Corridor pipeline system, including debt financing costs, operating costs, Rate Base (as defined in the

Corridor FSA) depreciation and taxes, as well as a rate of return on the equity component of the Rate Base determined

with reference to a spread over a long-term bond yield reported by the Bank of Canada.

Revenues associated with the transportation, storage and processing of hydrocarbons on the conventional oil pipelines

gathering systems, namely trunk line tariffs and gathering tariffs are recognized as the services are provided. The majority


of volumes are transported on the conventional oil pipelines gathering systems under short-term contracts with a fixed

tolling arrangement and no volume commitment made by the shipper.

Volumes purchased by Inter Pipeline to be used in the blending process that are then resold at a pre-arranged differential

are recognized on a net basis. Sales of additional volumes created through the blending process are recognized on a gross

basis with corresponding product purchases of blend components. Revenue is recognized when title is transferred.

Revenues are derived from the storage and handling of bulk liquid products and provision of complementary services and

are recognized as the services are provided. Revenue is measured at the fair value of the consideration received, excluding

discounts, rebates and sales taxes or duties. Revenue received in advance is recognized over the duration of the contract

to which it applies.

Revenue for the NGL extraction straddle plants is recognized when the earnings process is complete. This occurs when the

service is provided or when products are shipped to the customer in accordance with the terms of the sales contract, title

or risk of loss has been transferred and pricing is either fixed or determinable. Revenue recognition is based on three

methodologies: according to the terms of the commodity based arrangements which include an annualized adjustment;

fee based revenue which is recognized when volumes are produced; and cost-of-service revenue, which is predominantly

based on a fixed monthly fee.

Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset that takes a

substantial period of time to get ready for its intended use are capitalized as part of the cost of the related assets, until

such time as the assets are substantially ready for their intended productive use. All other borrowing costs are expensed in

the period in which they are incurred. Borrowing costs include interest and other costs incurred in connection with the

borrowing of funds. Borrowing costs are amortized over the estimated service life of the assets to which the borrowings

relate.

Consolidation of Non-Controlling Interest On January 2, 2003 Inter Pipeline acquired an additional 70% interest in Cold Lake which, combined with its initial 15%

investment acquired on October 5, 2000, resulted in Inter Pipeline owning an 85% interest in Cold Lake. The remaining

15% is owned by an unrelated third party.

Upon initial adoption of IFRS in 2011, and specifically IAS 27 Consolidated and Separate Financial Statements (IAS 27) and

IAS 31 Interests in Joint Ventures (IAS 31), Inter Pipeline determined that it had joint, rather than sole, control of Cold Lake.

Under IAS 27, control was defined as “the power to govern the financial and operating policies of an entity so as to obtain

benefits from its activities”. IAS 31 indicated that joint control existed when strategic financial and operating decisions

relating to the activity required the unanimous consent of the parties sharing control.

Cold Lake’s Unanimous Shareholder Agreement (USA) establishes the decision-making abilities of Cold Lake’s shareholders

in relation to the Cold Lake pipeline system. Cold Lake is administered by a management committee, with each owner

represented by two voting members. The USA splits decisions into two categories: those that require minimum approval

and those that require special majority approval. Decisions that are subject to minimum approval require an affirmative

vote by members of the management committee representing at least 50% of the shareholders. Therefore, Inter Pipeline

is the only owner that has the ability to approve items requiring minimum approval unilaterally. Decisions that are subject


to special majority approval require the affirmative vote of at least two members representing 75% or more of the

shareholders. Therefore, neither Cold Lake owner can unilaterally approve items requiring special majority approval.

Inter Pipeline and the third party owner had joint control given that both owners shared control over financing decisions

that required majority approval pursuant to the USA. As a result, Inter Pipeline’s interest in Cold Lake was treated as a joint

venture under IAS 31, and its 85% interest was proportionately consolidated.

In 2013, Inter Pipeline adopted IFRS 10 Consolidated Financial Statements (IFRS 10), which revised the definition of control

from IAS 27. Under IFRS 10, a single control model was established that focused on relevant activities, which are defined as

“activities of an investee that significantly affect the investee’s returns" (Relevant Activities), and specifically an investor’s

power to direct those activities, exposure to variable returns and the ability to use power to affect the amount of an

investor’s returns. Compared with the requirements of IAS 27, IFRS 10 requires management to exercise significant

judgment in its assessment of control including, but not limited to, the determination of the investee’s Relevant Activities,

the investor’s ability to direct those Relevant Activities, the investor’s exposure to returns of the investee, as well as rights

of other parties. IFRS 10 also requires management to continuously assess control over an investee.

In accordance with IFRS 10, Inter Pipeline determined that it had control over Cold Lake upon the acquisition of the

additional 70% interest in 2003. Inter Pipeline, as 85% owner of the Cold Lake pipeline system, has the ability to

unilaterally approve all Relevant Activities, which require minimal approval pursuant to the USA. The most significant

Relevant Activities include the identification of expansion and other transportation service opportunities, performance of

due diligence, undertaking economic feasibility studies and managing decisions to undergo non-Cold Lake TSA capital

projects, where a feasibility study has been undertaken. Management believes the ability to exclusively decide to proceed

with such capital projects, including the $1.5 billion (Inter Pipeline’s share) capital program to construct a bitumen blend

pipeline and associated facilities in support of the Foster Creek project, will significantly affect Cold Lake’s returns, which is

a key determination of control under IFRS 10. Such project returns are commercially negotiated by Inter Pipeline

separately from the fixed returns contained within the Cold Lake TSA.

Financing activities are not considered to be significant Relevant Activities given that Cold Lake does not have any external

debt, nor does Cold Lake have any intentions at this time to obtain debt financing in the future.

As a result of the foregoing, Inter Pipeline has the ability to unilaterally impact Cold Lake’s returns by proceeding with

significant capital projects, on a negotiated basis, without the approval or consent of the other third party owner. Projects

that require special majority approval are based on returns prescribed within the Cold Lake TSA and have limited

applicability to the determination of control under IFRS 10. Based on these considerations, Inter Pipeline has control over

Cold Lake.

FUTURE ACCOUNTING PRONOUNCEMENTS Certain new standards, interpretations and amendments to existing standards were issued by the IASB that are mandatory

for accounting periods beginning on or after January 1, 2015 or later periods with early adoption permitted. The standards

impacted are as follows:


IFRS 15 Revenue from Contracts with Customers (IFRS 15) IFRS 15 replaces IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations and shall be applied to annual

periods beginning on or after January 1, 2018, with early adoption permitted. IFRS 15 establishes a control based revenue

recognition model under which revenue is recognized when control of the underlying goods or services for the particular

performance obligation is transferred to the customer. Inter Pipeline is currently assessing the impact of IFRS 15; however

the extent of the impact has not yet been determined.

IFRS 9 Financial Instruments (IFRS 9) IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement and shall be applied to annual periods

beginning on or after January 1, 2018 with early adoption permitted. IFRS 9 establishes principles for the financial

reporting of financial assets and financial liabilities that will present relevant and useful information to users of financial

statements for their assessment of the amounts, timing and uncertainty of an entity’s future cash flows. Inter Pipeline is

currently assessing the impact of IFRS 9; however the extent of the impact has not yet been determined.

IFRS 16 Leases (IFRS 16) IFRS 16 replaces IAS 17 Leases and shall be applied to annual periods beginning on or after January 1, 2019, with early

adoption permitted. IFRS 16 establishes a single, on-balance sheet accounting model for lessees which will result in the

recognition of a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the

underlying asset for the lease term. Inter Pipeline is currently assessing the impact of IFRS 16; however, the extent of the

impact has not yet been determined.

RISK FACTORS The risks summarized in the following sections may require Inter Pipeline to invest additional capital, pursue alternative

business plans, or could have a material adverse effect on the business, financial condition and/or results of operations of

Inter Pipeline and its future ability to make cash dividends to shareholders. Readers are cautioned that this summary of

risks may not be exhaustive, as there may be risks that are unknown and other risks that may pose unexpected

consequences. Further, many of the risks are beyond Inter Pipeline’s control and, in spite of Inter Pipeline’s active

management of its risk exposure, there is no guarantee that risk management activities will successfully mitigate such

exposure.

Risks Associated with the Pipelines – The Oil Sands Transportation and Conventional Oil Pipelines Businesses

Throughput and Demand Risks Over the long term, Inter Pipeline’s business will depend, in part, on the level of demand for petroleum in the geographic

areas in which deliveries are made by the pipelines and the ability and willingness of shippers having access or rights to

utilize the pipelines to supply such demand. Inter Pipeline cannot predict the impact of future economic conditions, fuel

conservation measures, increasing demand for alternative fuel requirements, government regulation (including those

resulting from the ratification of greenhouse gas legislation, including the initiatives discussed below) or technological

advances in fuel economy and energy generation devices, all of which could reduce the demand for petroleum and major

Risks Associated with the Pipelines — The Oil Sands Transportation and Conventional Oil Pipelines Businesses


changes may have a material adverse effect on its business, financial condition, results of operations, cash flows and future

prospects.

Supply Risks and Commodity Prices Future throughput on the pipelines and replacement of petroleum reserves in the pipelines’ service areas are dependent

upon the success of producers operating in those areas in exploiting their existing reserve bases and exploring for,

developing and acquiring additional reserves. Reserve bases necessary to maintain long-term supply cannot be assured,

and petroleum price declines, without corresponding reductions in costs of production, may reduce or eliminate the

profitability of production and therefore the supply of petroleum for the pipelines. While reserve additions and increased

recovery rates can offset natural declines in petroleum production in the areas serviced by the pipelines, reserve additions

tend to not be sufficient to offset natural declines in produced volumes in certain service areas over the long term, which

reduces the likelihood that reserve additions and increased recovery rates will offset natural declines in petroleum

production in the future. Sustained low petroleum prices could lead to a decline in drilling or mining activity and

production levels or the shutting-in or abandonment of wells or oil sands operations. Drilling and mining activity,

production levels and shut-in or abandonment decisions may also be affected by the availability of capital to producers for

drilling, allocation by producers of available capital to produce oil as compared to natural gas, current or projected

petroleum price volatility, overall supply and demand expectations and light crude oil to heavy crude oil price differentials.

The pipelines are dependent on producers' continuing petroleum exploration and development activity and on

technological improvements leading to increased recovery rates in order to offset natural declines in petroleum

production in the areas serviced by the pipelines. Absent the continuation of such activities and improvements, the

volumes of petroleum transported on the pipelines will decline over time as reserves are depleted.

The Cold Lake, Polaris and Corridor pipeline systems service the Cold Lake and Athabasca oil sands regions of Alberta. Both

areas contain substantial oil sands deposits. Bitumen is produced in the Athabasca region using an open-pit mine

operation. In addition, in-situ recovery techniques such as cyclic steam stimulation (CSS) and steam-assisted gravity

drainage (SAGD) are utilized in both the Cold Lake and Athabasca regions. These techniques require higher levels of capital

investment and, as a result, bitumen production in these areas is more sensitive to lower producer netback prices than

crude oil production in the conventional oil pipeline business segment. Producer net-back prices are affected by several

factors including bitumen prices, natural gas and diluent costs, light crude oil to heavy crude oil price differentials and

government royalties. Natural gas is required to either heat water or generate steam in order to extract bitumen from the

oil sands deposits. As well, the viscosity of bitumen requires diluent, a light petroleum product, to be blended with the

bitumen to allow it to be transported through the pipeline. High natural gas prices or a shortage of diluent supply may

increase the overall costs of producing bitumen, which may reduce production and/or delay development of new

production in the Cold Lake and Athabasca oil sands regions.

The revenue generated from Inter Pipeline’s midstream marketing activities relies on the availability and pricing of

different crude oil streams and other commodities. The variability of supply, or an increase or decrease in the price of such

crude oil or commodities, could reduce the level of profit from these activities.

Competition and Contracts The majority of transportation revenue associated with Inter Pipeline’s conventional pipeline business has been and will

continue to be derived primarily from contracts or arrangements of 30 days duration or less with producers in the

geographic areas served by its pipelines. While Inter Pipeline attempts to renew contracts on the same or similar terms


and conditions, there can be no assurance that such contracts will continue to be renewed or, if renewed, will be renewed

upon terms favourable to Inter Pipeline. Inter Pipeline's transportation contracts with producers in the areas serviced by

the conventional oil pipelines business are based on market-based toll structures negotiated from time to time with

individual producers, rather than the cost-of-service recovery or fixed rate of return structures applicable to certain other

pipelines. The conventional oil pipelines business is, and will continue to be, subject to market competitive factors.

The pipelines are subject to competition for volumes transported by rail, trucking, or by other pipelines near the areas

serviced by the pipelines. Competing pipelines could be constructed in areas serviced by the pipelines. Rail has emerged as

a transportation option as producers seek to access higher value markets due to capacity constraints on pipelines.

The Cold Lake pipeline system is operated pursuant to long-term contracts with shippers (including the Cold Lake pipeline

system’s founding shippers) who have committed to utilizing the Cold Lake pipeline system and who pay for such usage

over the term of the contract. Pursuant to the Cold Lake TSA, the capital fee paid by the Cold Lake pipeline system’s

founding shippers is not subject to a minimum ship-or-pay threshold. Although volumes that are shipped by the Cold Lake

pipeline system’s founding shippers from the reserves dedication area while under the Cold Lake TSA are generally

committed to the Cold Lake pipeline system, the Cold Lake founding shippers may utilize alternative transportation

methods (if certain minimum volume levels are maintained) subject to Cold Lake LP's right to match the alternative

proposal. Consequently, there is no assurance that the level of volumes or revenues received from the Cold Lake founding

shippers will be sustained. The new bitumen blend pipeline system that Cold Lake LP constructed pursuant to contracts

with FCCL Partnership commenced operations in January, 2015, and the FCCL Partnership is obligated to transport

bitumen blend under a long-term ship-or-pay agreement that has an initial term of 20 years, with options to extend up to

an additional 30 years. However, there is no assurance that FCCL Partnership will be able to perform its obligations under

the contract with Cold Lake LP, or that revenues received from FCCL Partnership following the expiry of the term of the

contract will be sustained.

The Corridor pipeline system is operated pursuant to a long-term ship-or-pay contract with the Corridor shippers, who are

contractually obligated to utilize the Corridor pipeline system for the transportation of all bitumen and diluent used or

produced from the Athabasca oil sands project. The initial term of the agreement is 26 years, extending through 2028 with

options for further extensions. However, there is no assurance that the Corridor shippers will be able to perform their

obligations under the contract with Inter Pipeline, or that revenues received from the Corridor shippers following the

expiry of the term of the contract will be sustained.

The Polaris pipeline system is operated pursuant to long-term ship-or-pay contracts with various counterparties that are

contractually obligated to utilize the Polaris pipeline system. However, there is no assurance that these counterparties will

be able to perform their obligations under the contracts with Inter Pipeline, or that revenues received from the

counterparties following the expiry of the term of each contract will be sustained.

Corridor, Cold Lake LP and Inter Pipeline Polaris Inc. can supplement revenues by marketing excess capacity on all three oil

sands pipeline systems, including the excess capacity installed as part of the Cold Lake and Polaris pipeline system

expansions for the FCCL Partnership, to third parties, but there can be no assurance that they will be successful in doing so.

Furthermore, any potential third party capacity rights on the Corridor pipeline system are also subject to the approval of

the current Corridor shippers.


Operational Factors The pipelines are connected to various third party mainline systems such as the Enbridge system, Express pipeline, Trans

Mountain pipeline, and the Milk River pipeline, as well as refineries and third party storage terminals in those areas where

deliveries are made by the pipelines. Operational disruptions, apportionment, or changes to operating parameters on third

party systems or refineries may prevent the full utilization of the pipelines, and could have an otherwise adverse effect on

Inter Pipeline’s overall operating results. The pipelines are reliant on electrical power for their operations. A failure or

disruption within the local or regional electrical power supply or distribution or transmission systems could significantly

affect ongoing pipeline operations. In addition, a significant increase in the cost of power, fuel or other operating costs in

relation to the pipelines could have a materially negative effect on the level of profit realized by the pipeline business in

certain cases where the relevant contracts do not provide for recovery of such costs.

In the event of a major pipeline or facility incident resulting in the release of large quantities of product, dependent on the

location and applicable insurance coverage, there could be a significant impact to the revenues and continuing operation

of the impacted pipeline.

Rights-of-Way and Access Successful development of the pipelines through construction of new pipelines or extensions to existing pipelines depends

in part on securing leases, easements, rights-of-way, permits and/or licenses from landowners or governmental authorities

allowing access for such purposes. In general, the process of securing rights-of-way or similar access is becoming more

complex, particularly in more densely populated, environmentally sensitive and other areas. The Cold Lake, Corridor,

Polaris and Central Alberta pipeline systems have portions of their operations in the Edmonton area, with the Cold Lake

pipeline system also having operations in the Hardisty area and within the Cold Lake air weapons range. Although pipelines

have been constructed in these areas in recent years, these are three of the more difficult areas in which to secure

pipeline rights-of-way in the Province of Alberta.

Regulatory Factors The pipelines are subject to intra-provincial and multi-jurisdictional regulation, including regulation by the Alberta Energy

Regulator (AER) in Alberta, and the Ministry of the Economy in Saskatchewan. As a result, Inter Pipeline’s operations may

be affected by changes implemented by such regulatory authorities or in the legislation governing such authorities.

The Bow River, Central Alberta, Cold Lake, Corridor and Polaris pipeline systems are wholly within the boundaries of the

Province of Alberta and are primarily subject to regulation under the Pipeline Act (Alberta) and Pipeline Regulation

(Alberta), and by the AER. The Mid-Saskatchewan pipeline system is wholly within the boundaries of the Province of

Saskatchewan and is subject to regulation under the Pipelines Act (Saskatchewan) and the Pipelines Regulation

(Saskatchewan) and by the Ministry of the Economy in Saskatchewan. None of the pipelines are subject to regulation by

the National Energy Board (NEB).

Oil pipelines in Alberta may be subject to rate regulation pursuant to the Public Utilities Act (Alberta). In Saskatchewan, oil

pipelines may similarly be subject to rate regulation under the Pipelines Act (Saskatchewan).

Legislation in the Province of Alberta exists to ensure that shippers and producers have fair and reasonable opportunities

to produce, transport, process, and market their reserves. Under the Oil and Gas Conservation Act (Alberta), the AER may,

on application, declare the proprietor of a pipeline to be a common carrier of oil or natural gas such that the proprietor

must not discriminate among shippers and producers who seek access to the pipeline. If a pipeline is designated a


common carrier and agreement cannot be reached between a proprietor and a shipper as to the tariff to be charged, then

either party may apply to the Alberta Utilities Commission. Transportation service on the pipelines has been made

available on an open access, non-discriminatory basis and the pipelines’ tolls have not been set or restricted by any

regulatory agency. Should an order for access or for the setting of tolls be made, it could result in a toll reduction and

decreased revenue for Inter Pipeline.

Risks Associated with the Bulk Liquid Storage Business

Demand for Bulk Liquid Storage The Inter Terminals business in the UK, Ireland and Germany is primarily involved in the storage and handling of liquids for

local and regional petroleum refining and chemical businesses. The products stored and handled at these storage

terminals are generally either feedstock for chemical plants and refineries or are products produced from those facilities.

As a result, a sustained slowdown in either the petroleum refining, biofuels or chemical sectors serviced by the Inter

Terminals business could adversely affect the bulk liquid storage business.

Inter Terminals business in Denmark and Sweden are primarily involved in the storage and handling of liquids for the

petroleum refining and general oil-trading business. Therefore, a sustained slowdown in the petroleum sector could

adversely affect the Inter Terminals business. Sustained periods of backwardation in the oil products markets served by

Inter Terminals Denmark and Sweden could also adversely affect the Inter Terminals businesses.

The Inter Terminals Immingham terminals are highly integrated with two local refineries, the Phillips66 Humber refinery

and the Total Lindsey refinery. The closure of one or both refineries, or amalgamation under ownership by a single party,

could significantly reduce revenue from the Inter Terminals business. Inter Terminal’s Asnaes terminal handles some fuel

oil exports from the adjacent Statoil refinery. Any closure of this refinery would reduce revenue from the Inter Terminals

business. Furthermore, if this Statoil refinery were to subsequently be converted into a competing storage facility,

revenues from the Inter Terminals business could be significantly reduced. The Inter Terminals Sweden business is linked

to three local refineries operated by Preem, ST1 and Nynas. Closure of either the Preem or ST1 refineries could

significantly reduce revenues from the Inter Terminals Sweden business.

Customs and Excise Warehouses The Inter Terminals business operates approved customs warehouses and approved excise warehouses, thereby

permitting their respective customers to store products on a duty-suspended basis. Failure to comply with legal and

regulatory requirements governing the operation of such warehouses could lead to liability for customs and excise duties,

value added tax and penalties, including the withdrawal of the related authorizations, which in turn could result in a

reduction in commercial activity at the facilities. Authorizations granted for both customs warehouses and excise

warehouses gives rise to a risk that the Inter Terminals business could become jointly and severally liable with the product

owner to any duties or taxes on products irrespective of compliance with legal and regulatory requirements by the Inter

Terminals business.

The Inter Terminal business stores alcohol products at many warehouse locations. Failure to comply with regulatory

measures to counteract fraudulent activity within the alcohol sector could result in the Inter Terminals business being held

liable for duties or taxes in cases where it is evident that controls have not been sufficient to mitigate the risks.


Operational Factors In the event of a major facility incident resulting in a major fire or the release of large quantities of product, the location of

the bulk liquid storage facilities adjacent to water courses and large bodies of water could result in a major environmental

incident and significantly impact the revenues, reputation and continuing operation of the bulk liquid storage business.

Defined Benefit Pension Plan A defined benefit pension plan exists for certain employees of Inter Terminals’ UK and Irish business. The plan holds

interests in various securities invested in equities, fixed income instruments and real estate. Fluctuations in the value of

the plan’s assets and the factors which are applied to calculate the plan’s liabilities could result in a requirement for

additional cash to be contributed by Inter Pipeline.

Competition The bulk liquid storage business faces competition from other independent bulk liquid terminals which operate in several

of the regions serviced by Inter Terminals. Certain of the bulk liquid storage business' customers also have the option to

store products at their own storage facilities or to adopt alternative logistics solutions. As a result, customers could elect in

the future to make alternative arrangements for the storage and handling of their products resulting in a decline in the

bulk liquid storage business' revenue.

Land Lease Renewals Certain storage terminals and associated infrastructure are located on lands leased or licensed from third parties that must

be renewed from time to time. Failure to renew the leases or licenses on terms acceptable to Inter Pipeline could

significantly reduce the operations of the bulk liquid storage business, and could result in related decommissioning costs

for Inter Pipeline, pursuant to the terms of such leases or licenses. Where there is such a legal obligation, decommissioning

costs have been provided in the financial statements in accordance with IAS 37 Provisions, Contingent Liabilities and

Contingent Assets.

Foreign Exchange Risk The bulk liquid storage business' earnings and cash flows are subject to foreign exchange rate variability, primarily arising

from the denomination of such earnings and cash flows in British Pounds, Euros, Danish Kroner, Swedish Kronor and US

dollars.

Risks Associated with the NGL Extraction Business

Natural Gas Availability and Composition The volumes of natural gas processed by the NGL extraction business depend on the throughput of the TransCanada

Alberta System from which the NGL extraction facilities source their natural gas supply. Without reserve additions or other

new sources of gas supply, throughputs will decline over time as reserves are depleted in the areas these pipeline systems

service. Natural gas producers in these service areas may not be successful in exploring for and developing additional

reserves or commodity prices may not remain at a level that encourages gas producers to explore for and develop

additional reserves or to produce existing marginally economic reserves. Also, to continue to have the right to reprocess

natural gas for the purpose of NGL extraction from gas being transported on the TransCanada Alberta System, Inter

Pipeline will be required to continue to negotiate extraction agreements with the various natural gas shippers and there is

no assurance that Inter Pipeline will be able to renew contracts related to the NGL extraction business to extract NGL on

terms favourable to Inter Pipeline.


The production of NGL from the NGL straddle plants is largely dependent on the quantity and composition of the NGL

within the natural gas streams that supply the NGL extraction business. The quantity and composition of NGL may vary

over time. Also, marketable natural gas on the TransCanada Alberta System contains contaminants such as carbon dioxide

and various sulphur compounds that are concentrated in the NGL products through the extraction process. Increased

content of these contaminants in the natural gas supply may require incurring additional capital and operating costs at the

NGL extraction facilities. Other factors, such as an increased level of NGL recovery conducted at field processing plants

upstream of or in parallel to the NGL extraction facilities (including the Harmattan co-stream facility described below),

increased intra-Alberta consumption of natural gas or processing completed at any new extraction plants constructed

upstream of or in parallel to the NGL extraction facilities, or changes in the quantity and composition of the natural gas

produced from the reservoirs that supply the NGL extraction facilities, could have a materially negative effect on NGL

production from the NGL extraction business.

Operational Factors The NGL extraction facilities are connected to various third party systems, including the TransCanada Alberta System,

Kerrobert Pipeline, Co-Ed Pipeline and the Alberta Ethane Gathering System. Operational disruptions or apportionment on

those third party systems and/or disruptions at the other facilities in the Empress area may prevent the full utilization of

the NGL straddle plants.

The NGL extraction facilities are reliant on electrical power for their operations. A failure or disruption within the local or

regional electrical power supply or distribution or transmission systems could significantly affect ongoing NGL extraction

operations. In addition, a significant increase in the cost of power, fuel or other operating costs in relation to the NGL

extraction facilities could have a materially negative effect on the level of profit realized by the NGL extraction business in

certain cases where the relevant contracts do not provide for recovery of such costs.

In the event of a major facility incident, such as a fire or major equipment damage, there could be a significant impact to

the revenues and continuing operation of the impacted NGL straddle plant should insurance not cover the incident.

Competition The NGL extraction facilities are subject to natural gas markets and, as such, are subject to competition for gas supply from

all natural gas markets served by the TransCanada Alberta System. The NGL straddle plants are subject to competition

from other straddle plants that are in the general vicinity of the NGL straddle plants or that may be constructed upstream

of or in parallel to the NGL straddle plants, including the Harmattan co-stream facility, described below. The NGL

extraction facilities are also subject to competition from field processing facilities that extract NGL from the natural gas

streams before injection into the TransCanada Alberta System.

The Harmattan co-stream project, which became operational in late 2012, consisted of modifications to the Harmattan

facility and a new bypass pipeline around the Cochrane plant for the purpose of extracting NGL from up to 490 mmcf/d of

natural gas on the TransCanada Alberta System directly upstream of and in parallel to the Cochrane plant. This project has

caused and has further potential to cause a significant reduction in volumes available for processing at the Cochrane plant.

The Harmattan co-stream facility competes directly with the Cochrane plant for the right to reprocess gas volumes on the

TransCanada Alberta System.

To the extent that (i) other gas market participants are willing to pay for gas supply, (ii) existing or newly constructed

straddle plants or field processing plants are successful in securing natural gas supply currently processed at the NGL


straddle plants or are successful in removing significant amounts of NGL from the gas supply upstream of the NGL straddle

plants or (iii) products derived from the production at the NGL straddle plants cannot be priced competitively, Inter

Pipeline will be adversely affected.

Similarly, there is no assurance that new sources of natural gas supply that may be developed in areas such as Montney

and Duvernay in Northwest Alberta and Northeast British Columbia will be transported via the natural gas transmission

systems connected to the NGL straddle plants or that new extraction plants will not be constructed upstream of or in

parallel to the NGL straddle plants to process that natural gas.

Volumes of natural gas processed by the NGL extraction business are also dependent on commodity pricing competition

between the Western Canadian Sedimentary Basin (WCSB) natural gas and other recently developed natural gas basins

such as Marcellus. A growing supply of North American natural gas from such developments will compete with historical

supplies and may significantly change traditional natural gas flow patterns. Such natural gas flow patterns may also be

impacted by the development of Liquified Natural Gas (LNG) export facilities competing for volumes, potentially adversely

affecting natural gas to the NGL straddle plants.

The NGL produced at the NGL extraction facilities or derivatives produced at downstream customer facilities must

compete with similar products from other facilities on a local, regional or continental scale. The NGL markets in which Inter

Pipeline markets its production are exposed to new infrastructure additions, repurposing of existing infrastructure, and

significant changes in supply and demand associated with development of shale resources.

Commodity Price; Frac-spread At the Cochrane plant, Inter Pipeline is exposed to frac-spread risk or the relative price differential between the propane-

plus produced and the natural gas used to replace the heat content removed during extraction of the NGL from the natural

gas stream. The level of profit obtained from this portion of the NGL extraction business will increase or decrease as the

difference between the price of the applicable NGL and the price of natural gas varies. Propane-plus produced at the

Cochrane plant is based on NGL sales at Sarnia linked to Mont Belvieu rather than Edmonton prices and is also sold in US

currency, exposing Inter Pipeline’s frac-spread margin to currency risk.

Extraction Premiums Further influencing the profitability of the NGL extraction business is the cost of natural gas feedstock in excess of the

market price of natural gas. Currently, extraction premiums are paid to export shippers in exchange for the ability to

reprocess their natural gas for the purpose of NGL extraction. Historically, these premiums have been moderate relative to

the selling price of NGL, but it is possible that they could increase, which would adversely affect the NGL extraction

business.

Reliance on NOVA Chemicals, Dow Chemical, and Plains Midstream NOVA Chemicals, Dow Chemical, and Plains Midstream are the principal customers of the NGL extraction business and

represent the majority of the revenue from the NGL extraction business. Plains Midstream also operates the Empress II

plant and the Empress V plant. If, for any reason, any of the aforementioned parties were unable to perform their

obligations under the various agreements with Inter Pipeline, the financial results of the NGL extraction business or the

operations of the Empress II plant and the Empress V plant could be negatively impacted.


Regulatory Factors Straddle plants in Alberta are not commercially regulated and all such facilities secure extraction rights for the processing

of natural gas from shippers on the TransCanada Alberta System under proprietary commercial arrangements known as

the “NGL Extraction Convention”. If an alternative model for contracting for extraction rights was to be implemented it

would require changes to contracting counterparties and commercial arrangements, and potentially business process

changes to Inter Pipeline’s NGL extraction business segment, which changes could adversely affect the NGL extraction

business.

Risks Common to the Oil Sands Transportation, Conventional Oil Pipelines, NGL Extraction and Bulk Liquid Storage Businesses

Volatility in Commodity Prices Petroleum prices are determined by a wide range of political and economic factors external to Inter Pipeline and beyond

its control. These factors include economic conditions in the US and Canada and worldwide, the actions of Organization of

the Petroleum Exporting Countries (OPEC), governmental regulation, political stability in the Middle East and elsewhere,

weather conditions, the foreign supply of oil and natural gas, risks of supply disruption, the price of foreign imports and

the availability of alternative fuel sources. Any substantial and extended decline in the prices of oil and natural gas liquids

may have an adverse effect on Inter Pipeline’s borrowing capacity, revenues, profitability and FFO* and may have a

material adverse effect on Inter Pipeline's business, financial condition, results of operations, cash flows and future

prospects. Lower commodity prices may render Inter Pipeline's development and expansion plans uneconomic.

Petroleum prices are expected to remain volatile as a result of market uncertainties over the supply and demand of these

commodities that are caused by changing world economies, OPEC actions, credit and liquidity concerns and Middle East

political unrest. Volatile commodity prices make it difficult to estimate the value of projects and often cause disruption in

the market for oil and gas projects, as buyers and sellers have difficulty agreeing on such value. Price volatility also makes

it difficult to budget for and project the return on acquisition and development and expansion projects.

Execution Risk Inter Pipeline’s ability to successfully execute the development of its growth projects may be influenced by capital

constraints, third party opposition, changes in customer support over time, delays in or changes to government and

regulatory approvals, cost escalations, construction delays, shortages and in-service delays. Inter Pipeline’s growth plans

may strain its resources and may be subject to high cost pressures in the North American and European energy sectors.

Early stage project risks include right-of-way procurement, special interest group opposition, Crown consultation, and

environmental and regulatory permitting. Cost escalations may impact project economics. Construction delays due to slow

delivery of materials, contractor non-performance, weather conditions and shortages may impact project development

and timing of related revenue. Labour shortages, inexperience and productivity issues may also affect the successful

completion of projects.

Reputational Risk Reputational risk is the potential for negative impacts that could result from the deterioration of Inter Pipeline’s reputation

with key stakeholders. The potential for harming Inter Pipeline’s reputation exists in every business decision and all risks



can have an impact on reputation, which in turn can negatively impact Inter Pipeline’s business and the value of common

shares. Reputational risk cannot be managed in isolation from other forms of risk. Credit, market, operational, insurance,

liquidity and regulatory and legal risks must all be managed effectively to safeguard Inter Pipeline’s reputation. Negative

impacts from a compromised reputation could include reductions in cash flow and customer base, and decreases in the

value of common shares.

Inter Pipeline’s reputation as a reliable and responsible energy services provider with consistent financial performance and

long-term financial stability is one of its most valuable assets. The key to effectively building and maintaining Inter

Pipeline’s reputation is fostering a culture that promotes integrity and ethical conduct. Ultimate responsibility for Inter

Pipeline’s reputation lies with the executive team that examines reputational risk and issues as part of all business

decisions. Nonetheless, every employee of Inter Pipeline and other representatives of Inter Pipeline have a responsibility

to contribute in a positive way to Inter Pipeline’s reputation. This means ensuring compliance with applicable policies,

legislation and regulations, that ethical practices are followed at all times, and that interactions with our stakeholders are

positive. Reputational risk is most effectively managed when every individual works continuously to protect and enhance

Inter Pipeline’s reputation.

Credit Risk Inter Pipeline is subject to credit risk arising out of its operations. A majority of Inter Pipeline’s accounts receivable are

with customers in the oil and gas industry and are subject to normal industry credit risk. Credit risk is managed through

Inter Pipeline’s credit management policy which sets out guidelines for defining and measuring credit risk, establishes

credit risk thresholds and monitors the credit risk of counterparties and vendors. The credit worthiness assessment takes

into account available qualitative and quantitative information about the counterparty, including, but not limited to,

financial status and external credit ratings. Depending on the outcome of each assessment, guarantees, letters of credit or

some other form of credit enhancement may be requested as security, however, Inter Pipeline cannot be sure that

counterparties are able to or will provide such requested security or that the amount of security provided will secure all

obligations owing to Inter Pipeline. Inter Pipeline attempts to mitigate its exposure by entering into contracts with

customers that may entitle Inter Pipeline to lien or take product in kind and/or allow for suspension or termination of the

contract on the occurrence of certain events of default.

Royalty Regimes Inter Pipeline's pipeline and NGL extraction businesses may be impacted by changes to the oil and gas royalty regime in

effect in Alberta and Saskatchewan. Future royalty regime modifications could have adverse impacts on production of oil

and gas volumes. Such changes may directly or indirectly impact Inter Pipeline in a materially different manner and/or in a

manner that is more adverse to Inter Pipeline than the current royalty regime and regulatory framework.

Operational Factors Inter Pipeline's operations are subject to the customary hazards of the petroleum transportation, storage, marketing and

processing business. Inter Pipeline’s operations could be impacted by failures of pipelines (including pipeline leaks),

storage tanks, power infrastructure, equipment, information systems, the performance of equipment at levels below those

originally intended (whether due to misuse, unexpected degradation, design errors, or construction or manufacturing

defects), failure to maintain an adequate inventory of supplies or spare parts, operator error, labour disputes, disputes

with owners of interconnected facilities and carriers, and catastrophic events such as natural disasters, fires, flooding,

explosions, chemical releases, fractures, or other events beyond Inter Pipeline`s control, including acts of terrorists, eco-


terrorists and saboteurs, and other third party damage to Inter Pipeline’s assets. Operational errors could cause a process

safety incident that additionally results in reputational damage to the business. The occurrence or continuance of any of

these events could increase the cost of operating facilities and/or reduce their processing, throughput or storage capacity.

An operational incident might result in the loss of life as well as injury and property damage. Inter Pipeline carries

insurance with respect to some, but not all, casualty occurrences and disruptions. However, such coverage may not be

sufficient to compensate for all casualty occurrences.

Insurance of Inter Pipeline’s operations is susceptible to appetite for risk within the insurance market. Either general

market conditions or a poor claims record could result in significantly increased premiums or the impossibility of obtaining

coverage for certain risks. In the event that laws and regulations regarding minimum financial resources thresholds are

established in jurisdictions in which Inter Pipeline carries on business, Inter Pipeline may incur increased costs to comply

with such requirements.

Inter Pipeline has extensive integrity management programs in all of its business segments. While Inter Pipeline believes

its programs are consistent with industry practice, increasingly strict operational regulations or new data on the condition

of Inter Pipeline’s assets could result in repair or upgrading activities that are more extensive and costly than in the past.

Such developments could contribute to higher operating costs for Inter Pipeline or the termination of operations on the

affected portion of Inter Pipeline’s assets.

A significant operating cost for Inter Pipeline is electrical power. Deregulation of the Alberta electrical power market has

contributed to increased volatility in electrical power prices. Factors such as a shortage of electrical power supply or high

natural gas prices could contribute to higher electrical power prices, which may result in higher operating costs for Inter

Pipeline.

Inter Pipeline continues to build on its business continuity planning, which involves analyzing critical activities,

interdependencies and vulnerabilities to assist in prioritizing key functions and planning strategies and to recover or

maintain them in the event of a significant business disruption. Critical infrastructure, personnel, supervisory control and

data acquisition (SCADA) and information technology systems have redundancy established, which is intended to minimize

both the probability and impact of disruptive events, however there is no guarantee that such measures will be effective in

the event of a worst case scenario.

Regulatory Intervention and Changes in Legislation Although fees charged to customers of the pipelines and the NGL extraction business have not been set or restricted by

any regulatory agency, an application to the Alberta or Saskatchewan regulators for the setting of fees could result in a

reduction of fees and revenue for Inter Pipeline.

Income tax laws relating to the oil and natural gas industry or Inter Pipeline, environmental and applicable operating

legislation, and the legislation and regulatory framework governing the oil and natural gas industry may be changed in a

manner which adversely affects Inter Pipeline.

Failure of Inter Pipeline to comply with applicable regulations could result in sanctions, fines, litigation, or other adverse

outcomes.


New regulations or legislation introduced may result in a significant increase in operating costs to ensure compliance. Such

changes could have a materially negative effect on the level of profit realized by the pipeline business in certain cases

where the relevant contracts do not provide for recovery of such costs.

Decommissioning, Abandonment and Reclamation Costs Inter Pipeline is responsible for compliance with all laws, regulations and relevant agreements regarding the abandonment

of its assets at the end of their economic lives and all associated costs, which costs may be substantial. Abandonment costs

are a function of regulatory requirements at the time of abandonment, and the characteristics (such as diameter, length

and location) of the pipeline or the size and complexity of the NGL extraction or storage facility.

Abandonment requirements can vary considerably. For example, in the context of the pipelines, requirements can range

from simply emptying the pipeline and capping all open ends, to the removal of the pipeline and reclamation of the related

right-of-way. With respect to pipelines, the costs of abandonment have been limited primarily to the costs associated with

the removal of petroleum from the lines, refilling with inert gas and capping all open ends, the removal of any associated

surface facilities and surface reclamation of the disturbed site. However, future requirements are expected to be more

stringent.

Abandonment and reclamation costs for the NGL extraction facilities are regulated by the AER, pursuant to Directive 001

and Directive 024. The NGL extraction facilities are included in the AER’s Large Facilities Liability and Reclamation

Regulations and have defined reclamation requirements and financial tests to ensure that end of life costs can be funded.

However, future requirements may be more stringent.

In the future, Inter Pipeline may determine it prudent to establish and fund one or more reclamation trusts to address

anticipated abandonment costs. The payment of the costs of abandonment of the pipelines, the NGL extraction facilities,

or the assets of the bulk liquid storage business, or the establishment of reserves for that purpose, could have a materially

negative effect on the level of profit realized by Inter Pipeline.

Environmental Costs and Liabilities Inter Pipeline’s operations are subject to the laws and regulations of the European Union, UK, Germany, Ireland, Denmark,

Sweden, Alberta, Saskatchewan and the Canadian federal government relating to environmental protection and

operational safety. Inter Pipeline believes it is in material compliance with all required environmental permits and

reporting requirements.

In order to continuously improve environmental performance and address regulatory requirements, Inter Pipeline

routinely reviews systems, programs and processes critical to protecting the environment, including integrity programs,

leak detection systems, air monitoring systems, contaminated sites program and maintenance standards. Improvement

opportunities are implemented as deemed appropriate, with costs budgeted during Inter Pipeline’s normal budget cycle in

accordance with applicable accounting practices. Operation of certain of the pipelines, bulk liquid storage business assets

and NGL extraction facilities has spanned several decades. While the remediation of releases or contamination during such

period may have met then-current environmental standards, such remediation may not meet current or future

environmental standards and historical contamination may exist for which Inter Pipeline may be liable. Inter Pipeline has

completed internal environmental reviews that have identified locations of historical contamination and several locations

have been remediated. While Inter Pipeline believes such reviews have identified all locations of historical contamination,


others may exist. The remaining identified, but unremediated, sites will be addressed in a prioritized manner, utilizing

industry practices, with some locations being subject to multi-year restoration plans.

It is possible that other developments, such as increasingly strict environmental and safety laws, regulations and

enforcement policies thereunder, and claims for damages to property or persons resulting from Inter Pipeline's operations

and previously undetected locations of historical contamination, could result in substantial costs and liabilities for Inter

Pipeline. If, at any time, regulatory authorities deem any one of the NGL extraction facilities, oil sands transportation,

conventional oil pipelines or bulk liquid storage business assets unsafe or not in compliance with applicable laws, they may

order it shut down. Inter Pipeline could be adversely affected if it was not able to recover such resulting costs through

insurance or other means.

While Inter Pipeline maintains insurance in respect of damage caused by seepage or pollution in amounts it considers

prudent and in accordance with industry standards, certain provisions of such insurance may limit the availability thereof

in respect of certain occurrences unless such seepage or pollution is both sudden and unexpected, and discovered and

reported within fixed time periods. If Inter Pipeline is unaware of a problem or is unable to locate the problem within the

relevant time period, insurance coverage may not be available.

Greenhouse Gas Regulations Inter Pipeline's facilities and other operations and activities emit greenhouse gases (GHG) and require Inter Pipeline to

comply with greenhouse gas emissions legislation in Alberta. Alberta facilities emitting more than 100,000 tonnes of GHGs

a year are currently subject to compliance with the Climate Change and Emissions Management Act (CCEMA) which

requires a reduction in emissions intensity over a period of years. The CCEMA and the associated Specified Gas Emitters

Regulation require certain facilities to reduce their emissions intensity to 88% of their baseline for 2008 and subsequent

years, with their baseline being established by the average of the ratio of the total annual emissions to production for the

years 2003 to 2005. The Cochrane plant is the only asset of Inter Pipeline that is subject to provincial GHG regulations.

Regulated emitters can meet their emissions intensity targets by contributing to the Climate Change and Emissions

Management Fund or by purchasing emissions credits.

On November 22, 2015, the Government of Alberta announced a Climate Leadership Plan pursuant to which Alberta will

enact an economy-wide price on greenhouse gases, expected to be $20/tonne as of January, 2017 and increasing to

$30/tonne in January, 2018. The Plan also established an overall oil sands emissions limit of 100 megatonnes. Legislation

and regulation have yet to be developed but could have an adverse effect on Inter Pipeline's business, financial condition,

results of operations and prospects.

The Paris Climate Conference (COP) in 2015 resulted in the Paris Agreement, which expresses the long-term goal of

signatories to keep the increase in global average temperature to well below 2°C above pre-industrial levels and the aim to

limit the increase to 1.5°C. It also recognizes the need for global emissions to peak as soon as possible and to undertake

rapid reductions following such peak. In the event that Canada becomes a signatory to and ratifies the Paris Agreement,

Inter Pipeline may be required to comply with the regulatory scheme for GHG emissions ultimately adopted by the federal

government, which may or may not be consistent with the regulatory scheme for GHG emissions proposed for adoption in

Alberta. The future implementation or modification of GHG regulations, whether to meet the limits regulated by the Paris

Agreement or as otherwise determined, could have an adverse effect on Inter Pipeline's business, financial condition,

results of operations and prospects.


The adoption of legislation or other regulatory initiatives designed to reduce GHG and air pollutants from oil and gas

producers, refiners and chemical producers and electric generators in the geographic areas served by the pipelines, NGL

extraction facilities and bulk liquid storage business could result in, among other things, increased operating and capital

expenditures for those operators. This may make certain production of petroleum and natural gas by those producers

uneconomic, resulting in reduced or delayed production, or reduced scope in planned new development or expansion

projects. The operation of certain refineries and chemical plants may also become uneconomic. In addition, the adoption

of new regulations concerning climate change and the reduction of GHG emissions and other air pollutants or other

related federal or provincial legislation, may also result in higher operating and capital costs for the pipelines and NGL

extraction facilities. Given the evolving nature of the debate related to climate change and the control of GHG and

resulting requirements, it is not possible to predict the impact on Inter Pipeline and its operations and financial condition.

Dependence on Key Personnel The success of Inter Pipeline is largely dependent on the skills and expertise of key personnel who manage Inter Pipeline's

business. The continued success of Inter Pipeline will be dependent upon its ability to hire and retain such personnel. Inter

Pipeline does not have any "key man" insurance.

International Operations A portion of Inter Pipeline's operations are conducted in the UK, Germany, Ireland, Denmark and Sweden. Operations

outside of Canada are subject to various risks, including: currency exchange rate fluctuations; foreign economic conditions;

credit conditions; trade barriers; exchange controls; national and regional labour strikes; political risks and risks of

increases in duties; taxes and changes in tax laws; and changes in laws and policies governing operations of foreign-based

companies.

Possible Failure to Realize Anticipated Benefits of Acquisitions Inter Pipeline has completed a number of acquisitions and, as part of its business plan, anticipates making additional

acquisitions in the future. Achieving the benefits of completed and future acquisitions depends in part on successfully

consolidating functions and integrating operations, procedures and personnel in a timely and efficient manner, as well as

Inter Pipeline's ability to realize the anticipated growth opportunities and synergies from combining the acquired

businesses and operations with those of Inter Pipeline. The integration of acquired businesses requires the dedication of

substantial management effort, time and resources, which may divert management's focus, and resources from other

strategic opportunities and from operational matters. The integration process may also result in the loss of key employees

and the disruption of ongoing business, customer and employee relationships that may adversely affect Inter Pipeline's

ability to achieve the anticipated benefits of past and future acquisitions. Acquisitions may expose Inter Pipeline to

additional risks, including entry into markets or businesses in which Inter Pipeline has little or no direct prior experience,

increased credit risks through the assumption of additional debt, costs and contingent liabilities and exposure to liabilities

of the acquired business or assets.

Capital Maintenance Levels Inter Pipeline maintains and periodically replaces portions of its assets to sustain facility performance, provide a high level

of asset integrity and ensure reliable operations. The funds associated with these efforts may be in the form of sustaining


capital* or maintenance expenses. Maintenance expenses are a subset of “operating expenses” and are not reported

separately.

Inter Pipeline typically maintains its assets with reasonable levels of sustaining capital* and maintenance expenditures.

However, both sustaining capital* and maintenance expenditures may vary considerably from current and forecast

amounts as a result of a number of factors, including high equipment failure rates, more stringent government regulations

and any additional efforts deemed necessary by Inter Pipeline to improve the reliability of its assets. An increase in capital

and/or maintenance expenditures could result in significant additional costs to Inter Pipeline.

Possible Downgrade of Investment Grade Credit Ratings Inter Pipeline and its unsecured medium-term notes have investment grade credit ratings of BBB+ and BBB (high), by S&P

and DBRS, respectively. Corridor’s debentures have been assigned investment grade credit ratings of A, A2 and A by DBRS,

Moody’s and S&P, respectively. Should these credit ratings fall below investment grade, Inter Pipeline or Corridor may

have to provide security, pay additional interest or pay in advance for goods and services. The perceived creditworthiness

of Inter Pipeline and changes in its credit ratings may also affect the value of Inter Pipeline’s common shares. There is no

assurance that any credit rating assigned to Inter Pipeline or Corridor will remain in effect for any given period of time or

that any rating will not be lowered or withdrawn entirely by the relevant rating agency. A lowering or withdrawal of such

rating may have an adverse effect on the market value of Inter Pipeline’s common shares.

Corridor’s commercial paper is rated R-1 (low) by DBRS. If Corridor’s commercial paper rating falls below this level,

Corridor may not be able to issue commercial paper and be required to use higher cost financing to fund its financial

obligations.

Liquidity Risk Liquidity risk is the risk that Inter Pipeline will not be able to meet its financial obligations. To manage this risk, Inter

Pipeline forecasts its cash requirements to determine whether sufficient funds will be available. Inter Pipeline’s primary

sources of liquidity and capital resources are FFO*, draws under committed credit facilities and the issuance of new equity

capital or debt securities. Inter Pipeline maintains a current base shelf prospectus with Canadian securities regulators,

which enables, subject to market conditions, ready access to Canadian public capital markets.

Refinancing Risk Inter Pipeline's credit facilities, medium-term notes and other outstanding financing instruments or debt securities each

have a maturity date, on which date, absent replacement, extension or renewal, the indebtedness under the respective

loan agreement becomes repayable in its entirety. To the extent any of the loan agreements are not replaced or extended

on or before their respective maturity dates or are not replaced, extended or renewed for the same or similar amounts or

on the same or similar terms, Inter Pipeline's ability to fund ongoing operations and pay dividends could be impaired.

Inter Pipeline’s ability to refinance its indebtedness under its credit facilities, medium-term notes, and other outstanding

financing instruments or debt securities will depend upon its future operating performance and FFO*, which are subject to

prevailing economic and credit conditions, prevailing interest rate levels and financial, competitive, business and other

factors, many of which are beyond its control.



Litigation or Arbitration Inter Pipeline is not a party to any material litigation or arbitral matters. However, if any legitimate cause of action or

arbitral matter arose which was successfully prosecuted against Inter Pipeline, Inter Pipeline’s operations or results of

operations could be adversely affected.

Aboriginal Land Claims Aboriginal peoples have claimed aboriginal title and/or rights, whether established pursuant to treaty or otherwise, to a

substantial portion of the lands in western Canada. Such claims and rights could have an impact on future access to public

lands and thereby adversely affect Inter Pipeline’s Canadian operations.

Crown Duty to Consult First Nations The federal and provincial governments in Canada have a duty to consult and, where appropriate, accommodate

aboriginal people where the interests of the aboriginal peoples may be affected by a Crown action or decision.

Accordingly, the Crown’s duty may result in regulatory approvals being delayed or not being obtained in relation to Inter

Pipeline’s Canadian operations.

Weather Conditions Weather conditions can affect the demand for and price of natural gas and NGL. As a result, changes in weather patterns

can affect throughput, as well as Inter Pipeline’s NGL extraction and storage activities. For instance, colder winter

temperatures generally increase demand for natural gas and NGL used for heating which tends to result in increased

throughput volumes at facilities and higher prices in the extraction and storage businesses. In its storage facilities and NGL

extraction business, Inter Pipeline attempts to position itself to be able to handle increased volumes of throughput and

storage at its facilities to meet changes in seasonal demand; however, at any given time, facility and storage capacity is

finite.

Weather conditions may influence Inter Pipeline’s ability to complete capital projects or facility turnarounds on time,

potentially resulting in delays and increasing costs of such capital projects and turnarounds. Weather may also affect the

operations and projects of Inter Pipeline’s customers or shippers, thereby influencing the supply of products.

With respect to construction activities, in areas where construction can be conducted in non-winter months, Inter Pipeline

attempts to schedule its construction timetables so as to minimize delays due to cold winter weather. While availability of

trades and supplies does not always make this possible, Inter Pipeline has been relatively successful in minimizing

construction delays due to weather issues.

Labour Relations Labour unions may from time to time be established in certain Inter Pipeline business segments. Unionized labour

disruptions could restrict the ability of Inter Pipeline to carry out its business and therefore affect Inter Pipeline's financial

results.

Policies and Procedures Inter Pipeline has a number of formal and informal policies and procedures in place to govern certain business processes

and the entering into and administration of contracts. Deviations from such policies and procedures, or a lack of policies

and procedures, could result in negative impacts, including failure to realize all available revenue from contracts,

inefficiencies, potential litigation and decreases in the value of common shares.


Reliance on Information Technology Inter Pipeline’s operations are dependent on the functioning of several information technology systems. Significant

interruption or failure of any or all of these systems could result in operational outages, delays, lost profits, lost data,

increased costs, and other adverse outcomes. These factors could include a loss of communication links or reliable

information, security breaches by computer hackers and cyber terrorists, and the inability to automatically process

commercial transactions or engage in similar automated or computerized business activities.

Risks Inherent in the Corporation

Fluctuating Dividends; Dividends Are Not Guaranteed There is uncertainty with respect to future dividend payments by Inter Pipeline and the level thereof. Funds available for

the payment of dividends will be dependent upon, among other things, FFO*, the execution of its growth strategy, financial

requirements for Inter Pipeline's operations and limitations under its credit facilities as well as the satisfaction of liquidity

and solvency tests imposed by the Alberta Business Corporations Act (ABCA) on corporations for the declaration and

payment of dividends.

Market Price of the Common Shares The prices at which Inter Pipeline’s common shares will trade cannot be predicted. The annual yield on the common shares

as compared to annual yield on other financial instruments may also influence the price of Inter Pipeline’s common shares.

One of the factors that may influence the market price of Inter Pipeline’s common shares is the level of prevailing interest

rates relative to the yield achieved by shareholders based on annual dividends on the common shares. Accordingly, an

increase in market interest rates may lead purchasers of common shares to expect a higher effective yield, which could

adversely affect the market price of the common shares. In addition, the market price for Inter Pipeline’s common shares

may be affected by changes in general market or economic conditions, legislative changes, fluctuations in the markets for

equity securities, interest rates, commodity prices and numerous other factors beyond the control of Inter Pipeline.

Conflicts of Interest Certain directors of Inter Pipeline are also directors of other entities engaged in the energy business generally. As a result,

situations may arise where the interest of such directors conflict with their interests as directors of other companies. The

resolution of such conflicts is governed by applicable corporate laws, which require that directors act honestly, in good

faith and with a view to the best interests of the company. Conflicts, if any, will be handled in a manner consistent with the

procedures and remedies set forth in the ABCA. The ABCA provides that in the event that a director has an interest in a

contract or proposed contract or agreement, the director shall disclose his interest in such contract or agreement and shall

refrain from voting on any matter in respect of such contract or agreement unless otherwise provided by the ABCA.

Capital Resources Future expansions of Inter Pipeline’s assets and other capital expenditures will be financed out of FFO*, sales of additional

equity or debt securities and borrowings. There can be no assurance that sufficient capital will be available to Inter

Pipeline on acceptable terms, or in an amount sufficient, to fund expansion or other required capital expenditures.



Leverage Borrowings made by Inter Pipeline (including, for clarity, various subsidiaries thereof) introduce leverage into Inter

Pipeline’s business which increases the level of financial risk in the operations of Inter Pipeline, and, to the extent interest

rates are not fixed, increases the sensitivity of dividends by Inter Pipeline to interest rate variations.

Debt Restrictive Covenants The credit facilities, medium-term notes and the Corridor debentures described in the LIQUIDITY AND CAPITAL

RESOURCES section contain numerous restrictive covenants that limit the discretion of Inter Pipeline’s management with

respect to certain business matters. These loan agreements may contain covenants that place restrictions on, among other

things, the ability of Inter Pipeline to create liens or other encumbrances, to pay dividends or make certain other

payments, loans and guarantees, and to sell or otherwise dispose of assets and merge or consolidate with another entity.

In addition, the loan agreements contain various financial covenants that require Inter Pipeline to meet certain financial

ratios and financial condition tests. A failure to comply with these obligations could result in a default which, if not cured

or waived, could result in a reduction or termination of dividends by Inter Pipeline and permit acceleration of the relevant

indebtedness. In the case of Corridor, in the event of certain Corridor bankruptcy or insolvency events, Inter Pipeline

lenders have certain rights to accelerate Inter Pipeline’s debt. In addition, in some circumstances, it may become necessary

to restrict or terminate dividends by Inter Pipeline in order to avoid a default of such obligations.

Issues of Additional Common Shares; Dilution Inter Pipeline may issue additional common shares in the future to finance certain of Inter Pipeline’s capital expenditures,

including acquisitions. Any issuance of common shares may have a dilutive effect to existing shareholders.

Foreign Exchange Risk on Dividends Inter Pipeline's cash dividends will be declared and paid in Canadian dollars. As a consequence, non-resident shareholders,

and shareholders who calculate their income in currencies other than the Canadian dollar, will be subject to foreign

exchange risk. To the extent that the Canadian dollar strengthens with respect to the reporting currency of a shareholder,

the amount of the dividend will be reduced when converted to that currency.

NON-GAAP AND ADDITIONAL GAAP FINANCIAL MEASURES Certain non-GAAP financial measures referred to in this MD&A, namely “adjusted working capital deficiency”, “EBITDA”,

“adjusted EBITDA”, “Consolidated Net Debt to Total Capitalization” “enterprise value”, “growth capital expenditures”,

“sustaining capital expenditures”, “interest coverage”, and “payout ratio” are not measures recognized by GAAP. Certain

additional GAAP financial measures presented in the consolidated financial statements and referred to in this MD&A,

namely “funds from operations”, and “funds from operations per share” are not measures recognized by GAAP. These

non-GAAP and additional GAAP financial measures do not have standardized meanings prescribed by GAAP and therefore

may not be comparable to similar measures presented by other entities. Investors are cautioned that non-GAAP and

additional GAAP financial measures should not be construed as alternatives to other measures of financial performance

calculated in accordance with GAAP.


Non-GAAP Financial Measures The following non-GAAP financial measures are provided to assist investors with their evaluation of Inter Pipeline,

including their assessment of its ability to generate cash and fund monthly dividends. Management considers these non-

GAAP financial measures to be important indicators in assessing its performance.

Adjusted working capital deficiency is calculated by subtracting current liabilities from current assets including cash and

excluding the fair value of derivative financial instruments, commercial paper and current portion of long-term debt. This

financial measure is used by Inter Pipeline in the Contractual Obligations, Commitments and Guarantees table in the

LIQUIDITY AND CAPITAL RESOURCES section of this MD&A to capture other working capital items not specifically included

in the table.

December 312015 2014

Cash and cash equivalents 40.3$ 61.1$ Accounts receivable 183.1 156.8 Prepaid expenses and other deposits 26.9 27.0 Current income taxes receivable - 11.5

Current liabilitiesDividends payable (43.8) (39.9) Accounts payable, accrued liabilities and provisions (220.6) (390.2) Current income taxes payable (29.6) - Deferred revenue (7.5) (18.8)

(51.2)$ (192.5)$

Current assets

Adjusted working capital deficiency

(millions)

EBITDA and adjusted EBITDA are reconciled from the components of net income as noted below. EBITDA is expressed as

net income before total interest less capitalized interest, income taxes, depreciation and amortization; adjusted EBITDA

also includes additional adjustments for loss (gain) on disposal of assets, non-cash expense (recovery), non-cash financing

charges and unrealized change in fair value of derivative financial instruments. These additional adjustments are made to

exclude various non-cash items, or items of an unusual nature that are not reflective of ongoing operations. These

adjustments are also made to better reflect the historical measurement of EBITDA used in the investment community as

an approximate measure of an entity’s operating cash flow based on data from its income statement.


December 31 December 312015 2014 2015 2014

138.0$ 79.6$ 463.0$ 349.5$ Financing charges 38.5 27.5 142.1 93.6 Current income tax expense 25.3 (2.1) 70.0 45.4

17.7 33.3 117.4 69.6 Depreciation and amortization 52.5 39.7 188.4 142.8

272.0$ 178.0$ 980.9$ 700.9$ Loss (gain) on disposal of assets 0.6 2.9 5.6 (2.1) Non-cash financing charges (2.0) (2.1) (6.5) (6.5) Non-cash expense (recovery) 2.7 3.9 (0.1) 5.2

(0.1) 0.3 (0.2) (1.0) Adjusted EBITDA 273.2$ 183.0$ 979.7$ 696.5$

(9.8) (4.4) (41.0) (16.8) Adjusted EBITDA attributable to shareholders 263.4$ 178.6$ 938.7$ 679.7$

Years Ended

EBITDA

Unrealized change in fair value of derivative financial instruments

Less adjusted EBITDA attributable to non-controlling interest

Three Months Ended

(millions)Net income

Deferred income tax expense

Adjusted EBITDA by contract type is a percentage of adjusted EBITDA, reconciled in the table above, based on (i) cost-of-

service contracts which generally provide for a return on invested capital and recovery of substantially all operating costs.

This includes both cost-of-service contracts (agreements that are not impacted by throughput volume or commodity price

fluctuations) and modified cost-of-service contracts (agreements that may have throughput volume exposure in certain

circumstances) collectively referred to as cost-of-service contracts, (ii) fee-based contracts are generally subject to

throughput volume and operating cost exposure, but not commodity price fluctuations, and (iii) commodity-based

contracts are generally subject to throughput volume, operating cost and commodity price fluctuations. This measure, in

combination with other measures, is used by the investment community to assess the overall stability and predictability of

the business.


63% 48%30% 36%

7% 16%

Years Ended

Cost-of-serviceFee-basedCommodity-based

Adjusted EBITDA by contract type

Cost-of-service Fee-based

Commodity-based

√ - -- √ √- √ -√ √ √

Bulk liquid storageNGL extraction

Contract type by business segmentOil sands transportationConventional oil pipelines

Consolidated Net Debt to Total Capitalization is disclosed and discussed in the Financial Covenant table of the LIQUIDITY

AND CAPITAL RESOURCES section of this report. This measure in combination with other measures, are used by the

investment community to assess the financial strength of the business.


Enterprise value is calculated by multiplying the period-end closing common share price by the total number of common

shares outstanding and adding total debt (excluding discounts and debt transaction costs). This measure, in combination

with other measures, is used by the investment community to assess the overall market value of the business. Enterprise

value is calculated as follows:


22.21$ 35.94$ 336.4 326.2

7,472.0 11,724.1 4,851.7 4,590.7

12,323.7$ 16,314.8$ Total debtEnterprise value

Total closing number of common shares outstandingClosing share price(millions, except per share amounts)

Growth capital expenditures are generally defined as expenditures which are recoverable or incrementally increase cash

flow or earnings potential of assets, expand the capacity of current operations or significantly extend the life of existing

assets. This measure is used by the investment community to assess the extent of discretionary capital spending.

Sustaining capital expenditures are generally defined as expenditures which support and/or maintain the current

capacity, cash flow or earnings potential of existing assets without the associated benefits characteristic of growth capital

expenditures. This measure is used by the investment community to assess the extent of non-discretionary capital

spending.

Three Months Ended

2015 2014Growth Sustaining Total Total

19.6$ 0.3$ 19.9$ 123.2$ 22.1 3.1 25.2 22.0 10.0 5.4 15.4 10.3

0.9 0.4 1.3 3.8 Corporate - 18.6 18.6 3.7

52.6$ 27.8$ 80.4$ 163.0$

Capital expenditures funded by Inter Pipeline(1) 51.6$ 27.8$ 79.4$ 159.6$

Years Ended

2015 2014Growth Sustaining Total Total

146.4$ 1.1$ 147.5$ 1,128.5$ 123.4 7.1 130.5 52.7

25.0 15.3 40.3 33.9 1.5 6.2 7.7 11.9

Corporate - 29.9 29.9 9.2 296.3$ 59.6$ 355.9$ 1,236.2$

Capital expenditures funded by Inter Pipeline(1) 288.0$ 59.6$ 347.6$ 1,183.6$

Conventional oil pipelines

NGL extraction


Bulk liquid storage

December 31

December 31

Oil sands transportation

(millions)Oil sands transportation

NGL extractionBulk liquid storageConventional oil pipelines


(millions)

(1) Capital expenditures funded by Inter Pipeline exclude the 15% non-controlling interest in Cold Lake.


Interest coverage is calculated as net income attributable to shareholders plus income taxes, and borrowing costs, divided

by the sum of borrowing costs, capitalized borrowing costs and any retirement of obligations. This measure is used by the

investment community to determine the ease with which borrowing costs are satisfied.

Payout ratio is calculated by expressing dividends declared to shareholders for the period as a percentage of funds from

operations attributable to shareholders. This measure, in combination with other measures, is used by the investment

community to assess the sustainability of the current dividends.

Additional GAAP Financial Measures The following additional GAAP financial measures are provided to assist investors with their evaluation of Inter Pipeline,

including their assessment of its ability to generate cash and fund monthly dividends. Management considers these

additional GAAP financial measures to be important indicators in assessing its performance.

Funds from operations are reconciled from the components of net income as noted below. Funds from operations is

expressed before changes in non-cash working capital, see the DIVIDENDS TO SHAREHOLDERS section of this report for

further discussion. Funds from operations per share is calculated on a weighted average basis using basic common shares

outstanding during the period. These measures, together with other measures, are used by the investment community to

assess the source, sustainability and cash available for dividends.


138.0$ 79.6$ 463.0$ 349.5$ Depreciation and amortization 52.5 39.7 188.4 142.8 Loss (gain) on disposal of assets 0.6 2.9 5.6 (2.1) Non-cash expense (recovery) 2.7 3.9 (0.1) 5.2

(0.1) 0.3 (0.2) (1.0) 17.7 33.3 117.4 69.6

Funds from operations 211.4$ 159.7$ 774.1$ 564.0$

(9.8) (4.4) (41.0) (16.8) Funds from operations attributable to shareholders 201.6$ 155.3$ 733.1$ 547.2$

Funds from operations 211.4$ 159.7$ 774.1$ 564.0$ Total interest less capitalized interest 36.5 25.4 135.6 87.1 Current income tax expense (recovery) 25.3 (2.1) 70.0 45.4

Adjusted EBITDA 273.2$ 183.0$ 979.7$ 696.5$



Less funds from operations attributable to non-controlling interest

Unrealized change in fair value of derivative financial instrumentsDeferred income tax expense



ADDITIONAL INFORMATION Additional information relating to Inter Pipeline, including Inter Pipeline’s Annual Information Form is available on SEDAR

at www.sedar.com

The MD&A has been reviewed and approved by the Audit Committee and the Board of Directors of Inter Pipeline.

Dated at Calgary, Alberta this 18th day of February, 2016 64 INTER PIPELINE

















(0.1) 0.3 (0.2) (1.0) 17.7 33.3 117.4 69.6




Adjusted EBITDA 273.2$ 183.0$ 979.7$ 696.5$








at www.sedar.com


Dated at Calgary, Alberta this 18th day of February, 2016 64 INTER PIPELINE

















(0.1) 0.3 (0.2) (1.0) 17.7 33.3 117.4 69.6




Adjusted EBITDA 273.2$ 183.0$ 979.7$ 696.5$








at www.sedar.com


Dated at Calgary, Alberta this 18th day of February, 2016

71CO N S O L I DAT E D F I N A N C I A L STAT E M E N TSMANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING 65

Management’s Responsibility for Financial Reporting The management of Inter Pipeline Ltd. (Inter Pipeline) is responsible for the presentation and preparation of the accompanying

consolidated financial statements of Inter Pipeline.

The consolidated financial statements have been prepared by Inter Pipeline in accordance with International Financial

Reporting Standards as issued by the International Accounting Standards Board and Canadian generally accepted accounting

principles as contained within Part 1 of the Chartered Professional Accountants of Canada Handbook and, where necessary,

include amounts based on the best estimates and judgments of the management of Inter Pipeline.

The management of Inter Pipeline recognizes the importance of Inter Pipeline maintaining the highest possible standards in the

preparation and dissemination of statements presenting its financial condition. If alternative accounting methods exist,

management has chosen those policies it deems the most appropriate in the circumstances. In discharging its responsibilities

for the integrity and reliability of the financial statements, management has developed and maintains a system of accounting

and reporting supported by internal controls designed to ensure that transactions are properly authorized and recorded, assets

are safeguarded against unauthorized use or disposition, and liabilities are recognized.

Ernst & Young LLP, an independent firm of chartered accountants, was appointed to audit Inter Pipeline’s financial statements

and provide an independent audit opinion. To provide their opinion on the accompanying consolidated financial statements,

Ernst & Young LLP review Inter Pipeline’s system of internal controls and conduct their work to the extent they consider

appropriate.

The Audit Committee, comprised entirely of independent directors, is appointed by the Board of Directors of Inter Pipeline. The

Audit Committee meets quarterly to review Inter Pipeline’s interim consolidated financial statements and Management’s

Discussion and Analysis and recommends their approval to the Board of Directors. As well, the Audit Committee meets annually

to review Inter Pipeline’s annual consolidated financial statements and Management’s Discussion and Analysis and

recommends their approval to the Board of Directors. The Board of Directors approves Inter Pipeline’s interim and annual

consolidated financial statements and the accompanying Management’s Discussion and Analysis.

Inter Pipeline Ltd.

(Signed) Christian P. Bayle (Signed) Brent C. Heagy President and Chief Executive Officer Chief Financial Officer

February 18, 2016


66 INTER PIPELINE

Independent Auditors’ Report

To the Shareholders of Inter Pipeline Ltd. We have audited the accompanying consolidated financial statements of Inter Pipeline Ltd., which comprise the consolidated

balance sheets as at December 31, 2015 and 2014 and the consolidated statements of changes in equity, net income,

comprehensive income and cash flows for the years then ended, and 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 financial statements in accordance

with International Financial Reporting Standards, and for such internal control as management determines is necessary to

enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or

error.

Auditors’ responsibility Our responsibility is to express an opinion on these consolidated 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 to obtain reasonable assurance about whether the consolidated financial

statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated

financial statements. The procedures selected depend on the auditors’ 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 auditors consider internal control relevant to the entity's preparation and fair presentation of the

consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the

purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the

appropriateness of accounting policies used and the reasonableness of accounting estimates made by 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 sufficient and appropriate to provide a basis for our audit

opinion.

Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Inter

Pipeline Ltd. as at December 31, 2015 and 2014 and its financial performance and its cash flows for the years then ended, in

accordance with International Financial Reporting Standards.

Calgary, Canada February 18, 2016 Chartered Professional Accountants

73CO N S O L I DAT E D F I N A N C I A L STAT E M E N TS

Consolidated Balance Sheets As at

December 31 December 31(millions of Canadian dollars) 2015 2014

ASSETSCurrent Assets

Cash and cash equivalents (note 23) 40.3$ 61.1$ Accounts receivable 183.1 156.8 Current income taxes receivable (note 13) - 11.5 Derivative financial instruments (note 19) - 0.4 Prepaid expenses and other deposits 26.9 27.0

Total Current Assets 250.3 256.8

Non-Current AssetsProperty, plant and equipment (note 7) 8,183.9 7,793.7 Goodwill and intangible assets (note 8) 595.2 596.7

Total Assets 9,029.4$ 8,647.2$

LIABILITIES AND EQUITYCurrent Liabilities

Dividends payable (note 9) 43.8$ 39.9$ Accounts payable, accrued liabilities and provisions (notes 11 and 12) 220.6 390.2 Current income taxes payable (note 13) 29.6 - Derivative financial instruments (note 19) - 0.2 Deferred revenue 7.5 18.8 Convertible shares (note 14) - 170.0 Demand facility (note 10) 26.4 - Current portion of long-term debt (note 10) - 150.0 Commercial paper (note 10) 1,384.4 1,277.5

Total Current Liabilities 1,712.3 2,046.6

Non-Current LiabilitiesLong-term debt (note 10) 3,421.9 3,144.0 Provisions (note 11) 89.6 66.7 Employee benefits (note 12) 20.3 20.1 Long-term deferred revenue and other liabilities 10.7 13.9 Deferred income taxes (note 13) 618.0 481.3

Total Liabilities 5,872.8 5,772.6

Commitments (notes 7 and 17)

Shareholders' EquityShareholders' equity (note 14) 2,707.2 2,513.4 Total reserves (note 14) 113.9 34.7

Total Shareholders' Equity 2,821.1 2,548.1 Non-Controlling Interest (note 15) 335.5 326.5 Total Equity 3,156.6 2,874.6 Total Liabilities and Equity 9,029.4$ 8,647.2$

See accompanying notes to the consolidated financial statements.

On behalf of the Board of Directors of Inter Pipeline Ltd.:

(Signed) Richard A. Shaw (Signed) William D. RobertsonDirector Director

CONSOLIDATED FINANCIAL STATEMENTS 67


Consolidated Statements of Changes in Equity

(millions of Canadian dollars)

Non-Share Total Controlling

Capital Earnings / Contributed Reserves Shareholders' Interest Total(note 14) (Deficit) Surplus (note 14) Equity (note 15) Equity

Balance, January 1, 2015 2,625.9$ (115.0)$ 2.5$ 34.7$ 2,548.1$ 326.5$ 2,874.6$ Net income for the year - 427.4 - - 427.4 35.6 463.0 Other comprehensive income - - - 79.2 79.2 - 79.2 Dividends declared (note 9) - (497.1) - - (497.1) - (497.1) Issuance of common shares (note 14)

Issued under Premium Dividend™ and Dividend Reinvestment Plan 93.5 - - - 93.5 - 93.5 Exchanged from convertible shares 170.0 - - - 170.0 - 170.0

Cash distributions paid by Cold Lake to non-controlling interest - - - - - (39.5) (39.5)

Capital contributions received from Cold Lake non-controlling interest - - - - - 12.9 12.9

Balance, December 31, 2015 2,889.4$ (184.7)$ 2.5$ 113.9$ 2,821.1$ 335.5$ 3,156.6$

Balance, January 1, 2014 3,096.7$ (1,053.2)$ 2.5$ 54.3$ 2,100.3$ 284.0$ 2,384.3$ Net income for the year - 334.8 - - 334.8 14.7 349.5 Other comprehensive loss - - - (19.6) (19.6) - (19.6) Dividends declared (note 9) - (423.1) - - (423.1) - (423.1) Issuance of common shares (note 14)

Issued under Premium Dividend™ and Dividend Reinvestment Plan 264.5 - - - 264.5 - 264.5 Issued for cash (net of issue costs) 291.2 - - - 291.2 - 291.2

Stated capital adjustment (1,026.5) 1,026.5 - - - - - Cash distributions paid by Cold Lake

to non-controlling interest - - - - - (16.5) (16.5) Capital contributions received from

Cold Lake non-controlling interest - - - - - 44.3 44.3 Balance, December 31, 2014 2,625.9$ (115.0)$ 2.5$ 34.7$ 2,548.1$ 326.5$ 2,874.6$


™ Denotes trademark of Canaccord Genuity Corp.

Attributable to Shareholders of Inter Pipeline Ltd.

68 INTER PIPELINE


Consolidated Statements of Net IncomeYears Ended December 31

(millions of Canadian dollars) 2015 2014

REVENUESOperating revenues (note 25) 1,676.3$ 1,556.3$

EXPENSESShrinkage gas 183.1 297.0 Midstream product purchases 62.6 107.7 Operating (note 22) 381.3 367.9 Depreciation and amortization 188.4 142.8 Financing charges (note 21) 142.1 93.6 General and administrative (note 22) 63.0 85.9 Unrealized change in fair value of derivative financial instruments (0.2) (1.0) Loss (gain) on disposal of assets 5.6 (2.1)

1,025.9 1,091.8

INCOME BEFORE INCOME TAXES 650.4 464.5

Provision for income taxes (note 13)

Current 70.0 45.4 Deferred 117.4 69.6

187.4 115.0

NET INCOME 463.0$ 349.5$

Net income attributable toShareholders of Inter Pipeline Ltd. 427.4$ 334.8$ Non-controlling interest (note 15) 35.6 14.7

463.0$ 349.5$

Net income per share attributable to shareholders of Inter Pipeline Ltd. (note 14)

Basic 1.28$ 1.05$ Diluted 1.28$ 1.02$




Consolidated Statements of Comprehensive Income Years Ended December 31


NET INCOME 463.0$ 349.5$

OTHER COMPREHENSIVE INCOME (LOSS) (note 14)

Item that may be reclassified subsequently to net incomeUnrealized gain (loss) on translating financial statements of foreign operations 81.0 (15.2)

Items that will not be reclassified to net incomeActuarial loss on defined benefit pension plan (note 12) (1.6) (5.5) Income tax relating to defined benefit pension reserve (note 13) (0.2) 1.1

79.2 (19.6)

COMPREHENSIVE INCOME 542.2$ 329.9$

Comprehensive income attributable toShareholders of Inter Pipeline Ltd. 506.6$ 315.2$ Non-controlling interest (note 15) 35.6 14.7

542.2$ 329.9$


70 INTER PIPELINE


Consolidated Statements of Cash FlowsYears Ended December 31


OPERATING ACTIVITIESNet income 463.0$ 349.5$ Items not involving cash:

Depreciation and amortization 188.4 142.8 Loss (gain) on disposal of assets 5.6 (2.1) Non-cash (recovery) expense (0.1) 5.2 Unrealized change in fair value of derivative financial instruments (0.2) (1.0) Deferred income tax expense 117.4 69.6

Funds from operations 774.1 564.0 Net change in non-cash operating working capital (note 23) (13.6) 7.7 Cash provided by operating activities 760.5 571.7

INVESTING ACTIVITIESExpenditures on property, plant and equipment (341.6) (1,236.1) Proceeds on disposal of assets 4.0 7.5 Acquisition of Inter Terminals Sweden (note 5) (128.3) - Assumption of cash on acquisition of Inter Terminals Sweden (note 5) 0.6 - Net change in non-cash investing working capital (note 23) (151.0) (118.8) Cash used in investing activities (616.3) (1,347.4)

FINANCING ACTIVITIESCash dividends paid to shareholders of Inter Pipeline Ltd. (note 9) (403.6) (158.6) Cash distributions paid by Cold Lake to non-controlling interest (39.5) (16.5) Cash contributions received from Cold Lake non-controlling interest 12.9 44.3 Increase in debt 261.7 629.9 Transaction costs on debt (3.2) (4.6) Issuance of common shares - 300.6 Share issue costs - (11.9) Net change in non-cash financing working capital (note 23) 4.4 7.1 Cash (used in) provided by financing activities (167.3) 790.3

Effect of foreign currency translation on foreign currency denominated cash 2.3 (0.7)

(Decrease) increase in cash and cash equivalents (20.8) 13.9 Cash and cash equivalents, beginning of year 61.1 47.2 Cash and cash equivalents, end of year 40.3$ 61.1$

Cash taxes paid 27.4$ 87.4$ Cash interest paid 134.5$ 137.8$




72 INTER PIPELINE

Notes to Consolidated Financial Statements December 31, 2015 (millions of Canadian dollars, except as otherwise indicated)

1. STRUCTURE OF THE CORPORATION Inter Pipeline Ltd. (Inter Pipeline or the Corporation) was incorporated under the provisions of the Business Corporations Act

(Alberta) on January 29, 2013. On May 31, 2013, the Corporation changed its name to Inter Pipeline Ltd. from 1726761 Alberta

Ltd. On September 1, 2013, the Corporation carried on the business of Inter Pipeline Fund (the Fund) following the conversion

from a limited partnership to a dividend paying corporation (Corporate Conversion) pursuant to a plan of arrangement under

the Business Corporations Act (Alberta). The Fund was dissolved and, as a result, comparative figures in these and future

financial statements reflect the history of the Fund, as previously reported, to the date of Corporate Conversion.

Inter Pipeline is comprised of four industry operating segments located in two geographic segments: oil sands transportation

business, conventional oil pipelines business and natural gas liquids (NGL) extraction business, all operating in Canada, and the

bulk liquid storage business, which operates in Europe. The head office, principal address and records office of Inter Pipeline

are located at 2600, 237 – 4th Avenue SW, Calgary, Alberta, Canada.

These audited consolidated financial statements were authorized for issue in accordance with a resolution of the Board of

Directors of Inter Pipeline on February 18, 2016.

2. STATEMENT OF COMPLIANCE AND BASIS OF PREPARATION These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards

(IFRS) as issued by the International Accounting Standards Board (IASB). Certain prior year balances have been reclassified to

match the current year presentation. The accounting policies that follow have been consistently applied to all years presented.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Measurement Basis The financial statements are prepared on a going concern basis, under the historical cost convention except for long-term

incentive plan (LTIP) awards that have been measured at fair value.

The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also

requires management to exercise judgment in applying Inter Pipeline’s significant accounting policies. The areas involving a

higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements

are disclosed in note 3c.

b) Basis of Consolidation These audited consolidated financial statements include the accounts of Inter Pipeline, its subsidiary companies, partnerships

and any joint arrangements. The financial statements of the subsidiary companies, partnerships and joint arrangements are

prepared for the same reporting period as Inter Pipeline, using consistent accounting policies.

79N OT ES TO T H E CO N S O L I DAT E D F I N A N C I A L STAT E M E N TS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 73

Subsidiaries Subsidiaries are fully consolidated from the date of acquisition, being the date on which Inter Pipeline obtained control, and

continue to be consolidated until the date that such control ceases. Intercompany balances, transactions, and unrealized gains

and losses from intercompany transactions, are eliminated on consolidation. Ownership interests in subsidiaries represented

by other parties that do not control the entity are presented in the consolidated statements as balances and activities

attributable to non-controlling interest.

Non-controlling Interest Inter Pipeline has an indirect 85% ownership interest in the Cold Lake Pipeline Limited Partnership (Cold Lake LP) and an 85%

ownership interest in its general partner, Cold Lake Pipeline Ltd. (collectively Cold Lake). Non-controlling interest represents a

15% ownership interest in Cold Lake attributable to an unrelated third party. Cold Lake is governed by a Unanimous

Shareholder Agreement (USA) which establishes the decision making abilities of the Cold Lake shareholders in relation to the

Cold Lake pipeline system. Inter Pipeline has the ability to unilaterally approve those activities determined by management to

most significantly impact returns without the consent of the unrelated third party, such as the identification of expansion and

other transportation service opportunities, performance of due diligence, undertaking economic feasibility studies and

managing decisions to undergo non-Cold Lake Transportation Service Agreement (TSA) capital projects, where a feasibility

study has been undertaken. Accordingly, the results of Cold Lake are fully consolidated by Inter Pipeline and the portion of

equity in entities not owned by Inter Pipeline is reflected as non-controlling interest within total equity on the consolidated

balance sheets.

Interest in Joint Operation Inter Pipeline has a 50% interest in the Empress V NGL extraction facility which is accounted for as a joint operation. Empress V

is not a separate legal entity and all strategic financial and operating decisions must be jointly agreed by all parties to the joint

arrangement. All parties have direct exclusive rights to their joint interest share of the Empress V assets and the economic

benefit generated from them. Accordingly, the results of Empress V are consolidated in a manner that reflects Inter Pipeline’s

50% interest in the individual income, expenses, assets, liabilities and cash flows of Empress V on a line by line basis in the

consolidated results.

Business Combinations Business acquisitions are accounted for using the acquisition method of accounting at the date control of a business is

obtained. The cost of an acquisition is measured as the aggregate of the fair values of the assets given or equity instruments

issued, net of liabilities incurred or assumed, and is allocated to the fair value of the acquiree’s identifiable net assets acquired,

including intangible assets. Goodwill is recognized when the cost of the acquisition exceeds the fair value of the identifiable net

assets acquired. Costs directly associated with the acquisition are expensed.

c) Critical Accounting Estimates and Judgments The preparation of the annual consolidated financial statements in accordance with IFRS requires management to make

judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets,

liabilities, income and expenses. Estimates and underlying assumptions are reviewed on an ongoing basis and are based on

management’s experience and other factors, including expectations about future events that are believed to be reasonable

under the circumstances. Revisions to accounting estimates are recognized in the period in which the estimates are revised and

in any future periods affected.


74 INTER PIPELINE

The amounts recorded for consolidation of non-controlling interest; impairment of non-financial assets; depreciation and

amortization; revenue from oil sands transportation service agreements; provisions; deferred income taxes; and business

combinations are based on estimates and judgments. By their nature, these estimates and judgments are subject to

measurement uncertainty and the effect on the financial statements of changes in such estimates and judgments in future

years could be material. The following discusses the most significant accounting judgments and estimates that Inter Pipeline

has made in the preparation of these consolidated financial statements.

Consolidation of Non-controlling Interest Management is required to exercise significant judgment in its assessment of control including, but not limited to, the

determination of the activities of the investee that significantly affect the investee’s returns, the investor’s ability to direct

those activities, the investor’s exposure to returns of the investee, as well as the rights of other parties.

Cold Lake’s USA establishes the decision-making abilities of Cold Lake’s shareholders in relation to the Cold Lake pipeline

system. Inter Pipeline has the ability to unilaterally approve those activities determined by management to most significantly

impact Cold Lake’s returns and to proceed with significant capital projects, on a negotiated basis, without the approval or

consent of the other third party owner. As a result, Inter Pipeline continues to have control over Cold Lake.

Impairment of Non-financial Assets For the purposes of Inter Pipeline’s impairment testing, fair value is estimated using a discounted cash flow methodology. This

method estimates fair value less costs of disposal using a discounted ten year forecasted cash flow with a terminal value, based

on Inter Pipeline’s assessment of the long-term outlook for each business. Cash flows are estimated from several sources

including internal budgets and long-term contractual agreements with customers. Observable market data is used to develop

discount rates for each business, which approximate the discount rate from a market participant’s perspective. The fair value

measurement is classified within level 3 of the fair value hierarchy (note 3p).

The determination of the magnitude of impairment involves the use of estimates, assumptions and judgments on highly

uncertain matters particularly with respect to determining fair value less costs of disposal. Such estimates, assumptions and

judgments include, but are not limited to, the choice of discount rates that reflect appropriate asset-specific risks, timing of

revenue and customer turnover, inflation factors for projected operating and maintenance capital expenditures and

commodity prices.

Impairment indicators include, but are not limited to, a significant decline in an asset’s market value, significant adverse

changes in the technological, market, economic or legal environment in which the assets are operated, evidence of

obsolescence or physical damage of an asset, significant changes in the planned use of an asset, or ongoing under-performance

of an asset. Application of these factors to the facts and circumstances of a particular asset requires a significant amount of

judgment.

For the purposes of Inter Pipeline’s goodwill impairment testing, the recoverable value of a cash generating unit (CGU)

calculated in a preceding year may be used in the current year if certain conditions are met. These conditions include: that the

assets and liabilities of the CGU to which goodwill has been allocated have not changed significantly since the recoverable

value was previously calculated; the most recent recoverable value calculation exceeded the CGU’s carrying amount by a

substantial margin; and based on an analysis of events that have occurred and circumstances that have changed since the most

recent recoverable value was calculated, the likelihood that a current recoverable value calculation would be less than the

current carrying amount of the CGU is remote. In 2015, Inter Pipeline calculated the recoverable value of the Inter Terminals



Denmark GCU. The recoverable values calculated in 2014 were used by the Corridor, Polaris, and Inter Terminals United

Kingdom (UK), Germany and Ireland CGU’s.

Depreciation and Amortization

Calculation of the net book value of property, plant and equipment and intangible assets requires Inter Pipeline to make

estimates of the useful life of the assets, residual value at the end of the asset’s useful life, method of depreciation and

amortization and whether impairment in value has occurred. Residual values of the assets, estimated useful lives and

depreciation and amortization methodology are reviewed annually with prospective application of any changes, if deemed

appropriate. Changes to estimates and specifically those related to pipeline assets, which could be significant, could be caused

by a variety of factors, including changes to the physical life of the assets as well as the estimated remaining life of crude oil

reserves expected to be gathered and shipped on these pipeline systems. A change in any of the estimates would result in a

change in the amount of depreciation and, as a result, a charge to net income recorded in the period in which the change

occurs, with a similar change in the carrying value of the asset on the consolidated balance sheets.

Revenue from Oil Sands Transportation Services Agreements Inter Pipeline conducts most of its oil sands transportation business under long-term transportation service agreements.

Judgment is required when assessing whether the deliverables within an agreement are separately identifiable services. A

service is considered separately identifiable if a shipper can benefit from the service on its own, independent from other

services in the contract. Separately identifiable services may include, but are not limited to, ship-or-pay transportation services

utilizing dedicated capacity and spot transportation services where capacity is not reserved for the shipper.

Revenue is allocated between the separately identifiable services based on their relative estimated stand-alone selling prices,

determined at contract inception. In the absence of available market prices, the determination of stand-alone fair value for

each identifiable service requires the use of estimates and assumptions including, but not limited to, volume and capital

requirements, length of contract, location, and competitive environment. Forecasting volumes involves the use of estimates,

assumptions and judgments on highly uncertain matters, such as when a shipper’s production facility will commence

operations, speed and magnitude of production ramp-up, timing of additional capital projects and the ultimate production

capacity of the shipper’s production facilities.

Provisions

Inter Pipeline is required to apply a number of assumptions in estimating provisions recorded for decommissioning and

environmental remediation associated with Inter Pipeline’s sites. Liabilities are calculated based on current price estimates

using current technologies in accordance with current legal or constructive requirements. Liabilities are adjusted for inflation to

reflect the timing of when the decommissioning or remediation activity is anticipated. Where a range of estimates exists, the

possible outcomes are weighted to determine a probable settlement value or the midpoint is used where all outcomes are

equally likely. Inter Pipeline’s decommissioning obligations are expected to occur when the assets are no longer economically

viable. The economic lives of these assets are estimated based on future expectations involving the supply of petroleum,

chemical and other products and demand for certain services and therefore the timing of decommissioning may change

significantly in the future. Actual costs and cash outflows may differ from these estimates due to changes in laws or

regulations, timing of projects, costs and technology. As a result, there could be material adjustments to the provisions

established. If the effect of the time value of money is material, provisions are discounted to their present value using a pre-tax

risk-free rate.


76 INTER PIPELINE

Oil Sands Transportation Business and Conventional Oil Pipelines Business

Property, plant and equipment related to the oil sands transportation and conventional oil pipelines businesses consist

primarily of underground pipelines and above ground equipment and facilities. The potential cost of future decommissioning

activities is a function of several factors, including regulatory requirements at the time of pipeline abandonment, the diameter

and length of the pipeline and the pipeline's location. Decommissioning requirements can vary considerably, ranging from

purging product from the pipeline, refilling with inert gas and capping all open ends to removal of the pipeline and reclamation

of the right-of-way. Under current regulations, the estimated cost for the decommissioning obligation includes such activities

as: purging product from the pipeline, refilling with inert gas and capping all open ends and removal of surface facilities and

reclamation of the surface facility sites.

NGL Extraction Business and Bulk Liquid Storage Business

NGL extraction and the bulk liquid storage businesses consist mainly of three NGL extraction straddle plants and sixteen bulk

liquid storage facilities, respectively. Inter Pipeline’s decommissioning obligation represents the present value of the expected

cost to be incurred upon the termination of operations and closure of the NGL extraction straddle plants and leased bulk liquid

storage sites. The estimated costs for decommissioning obligations include such activities as dismantling, demolition and

disposal of the facilities and equipment, as well as remediation and restoration of the sites.

Deferred Income Taxes Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the

deductible temporary differences and carried forward tax losses can be utilized. Assessing the recoverability of deferred taxes

requires management to make significant estimates related to expectations of future taxable income. Estimates of future

taxable income are based on forecasted funds from operations and the application of existing tax laws.

The carrying amount of deferred tax assets is reviewed each reporting date and reduced to the extent that it is no longer

probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized

deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that

future taxable profits will allow the deferred tax asset to be recovered.

Deferred income taxes contain uncertainties because of the assumptions made about when deferred tax assets are likely to

reverse, and a judgment as to whether or not there will be sufficient taxable profits available to offset the tax assets when they

do reverse. This requires assumptions regarding future profitability and is therefore inherently uncertain.

Business Combinations The consideration transferred of an acquired business is allocated to the identifiable assets acquired and liabilities assumed at

their estimated fair values on the acquisition date. The excess of the consideration transferred over the amount allocated to

net assets is recorded as goodwill. All available information is used to estimate fair values. External consultants are typically

engaged to assist in the fair value determination of identifiable intangible assets and other significant assets or liabilities. The

preliminary allocation of consideration transferred may be adjusted, as necessary, up to one year after the acquisition closing

date due to additional information impacting asset valuation and liabilities assumed.

The allocation process of the consideration transferred involves uncertainty as management is required to make assumptions

and apply judgment to estimates of the fair value of the acquired assets and liabilities, including highest and best use of assets.

Quoted market prices and widely accepted valuation techniques, including discounted cash flows and market multiple analyses



are used to estimate the fair market value of the assets and liabilities and depreciated replacement costs is used for the

valuation of tangible assets. These estimates include assumptions on inputs within the discounted cash flow calculations

related to forecasted revenues, cash flows, contract renewals, asset lives, industry economic factors and business strategies.

d) Segment Reporting Inter Pipeline determines its reportable segments based on the nature of its operations and geographic location, which is

consistent with how the business is managed and results reported to the chief operating decision maker. Each operating

segment, which is equivalent to a reportable segment, also uses a measure of profit and loss that represents income after

income taxes.

The following expenses are only recorded in certain segments as this allocation reflects how the segments’ profit and loss is

reported to the chief operating decision maker: Canadian general and administrative costs are allocated to the corporate

segment unless they are recoverable through contracts with third parties, in which case they are allocated to the operating

segment that holds the contract. Financing costs related to interest or accretion expense are allocated to the operating

segment that holds the associated debt or provision obligation. Income taxes are allocated to the oil sands transportation

business, bulk liquid storage and corporate segments which contain taxable corporations.

Operating segment assets and liabilities are measured on the same basis as consolidated assets and liabilities.

Industry Segments The oil sands transportation business consists of the Cold Lake, Corridor and Polaris pipeline systems that transport petroleum

products and provide related blending and handling services in Alberta. The conventional oil pipelines business primarily

involves the transportation, storage and processing of hydrocarbons, as well as midstream marketing blending and handling

services. The NGL extraction business consists of processing natural gas to extract NGLs including ethane and a mixture of

propane, butane and pentanes plus (collectively known as propane-plus). The bulk liquid storage business involves the primary

storage and handling of bulk liquid products through the operation of sixteen bulk liquid storage terminals.

Geographic Segments Inter Pipeline has two geographic segments, Canada and Europe. The bulk liquid storage business is located in Europe, while all

other operating segments are located in Canada.

e) Revenue Recognition

Oil Sands Transportation Business Revenue is recorded when services have been performed, the amount of revenue and associated costs can be reliably

measured and when it is probable that consideration will be collected.

The Cold Lake and Polaris pipeline systems revenue is determined by the nature of the contract and is either recognized ratably

over the term of fixed fee arrangements, or as volumes are transported and services are provided to each shipper. Where

transportation agreements involve separately identifiable services, consideration is allocated amongst the services based on

their relative estimated stand-alone selling prices. Long term ship-or-pay agreements, under which shippers are obligated to

pay fixed amounts ratably over the life of the agreement regardless of volumes shipped, may contain make-up rights. Make-up

rights are earned by the shippers when minimum volume commitments are not utilized during the period but under certain

circumstances can be used to offset excess volumes in future periods, subject to expiry periods. Inter Pipeline recognizes


78 INTER PIPELINE

revenues associated with make-up rights at the earlier of when the make-up volume is shipped, the make-up right expires, or

when it is determined that the likelihood that the shipper will utilize the make-up rights is remote.

Revenue on the Corridor pipeline system is recognized as services are provided in accordance with terms prescribed by the

Firm Service Agreement (Corridor FSA) with the shippers. Under the terms of the Corridor FSA, revenues are determined by an

agreed upon annual revenue requirement formula which allows for the recovery of prescribed expenditures and costs

associated with the operation of the Corridor pipeline system, including debt financing costs, operating costs, Rate Base (as

defined in the Corridor FSA) depreciation and taxes, as well as a rate of return on the equity component of the Rate Base

determined with reference to a spread over a long-term bond yield reported by the Bank of Canada.

Conventional Oil Pipelines Business Revenues associated with the transportation, storage and processing of hydrocarbons on the conventional oil pipelines

gathering systems, namely trunk line tariffs and gathering tariffs are recognized as the services are provided. The majority of

volumes are transported on the conventional oil pipelines gathering systems under short-term contracts with a fixed tolling

arrangement and no volume commitment made by the shipper.

Volumes purchased by Inter Pipeline to be used in the blending process that are then resold at a pre-arranged differential are

recognized on a net basis. Sales of additional volumes created through the blending process are recognized on a gross basis

with corresponding product purchases of blend components. Revenue is recognized when title is transferred.

Bulk Liquid Storage Business Revenues are derived from the storage and handling of bulk liquid products and provision of complementary services and are

recognized as the services are provided. Revenue is measured at the fair value of the consideration received, excluding

discounts, rebates and sales taxes or duties. Revenue received in advance is recognized over the duration of the contract to

which it applies.

NGL Extraction Business Revenue for the NGL extraction straddle plants is recognized when the earnings process is complete. This occurs when the

service is provided or when products are shipped to the customer in accordance with the terms of the sales contract, title or

risk of loss has been transferred and pricing is either fixed or determinable. Revenue recognition is based on three

methodologies: according to the terms of the commodity based arrangements which include an annualized adjustment; fee

based revenue which is recognized when volumes are produced; and cost-of-service revenue, which is predominantly based on

a fixed monthly fee.

Deferred Revenue Deferred revenue represents cash received in excess of revenues recognized.

f) Net Income per Common Share Basic net income per common share is calculated by dividing the net income for the year attributable to common shareholders

of Inter Pipeline by the weighted average number of common shares outstanding during the period. Diluted net income per

common share is determined by adjusting the weighted average number of common shares outstanding for the effects of all

potentially dilutive common shares, using the treasury stock method. Outstanding shares issued under the Premium



Dividend and Dividend Reinvestment Plan are assumed to have been converted to common shares at the date of record, and

convertible shares outstanding at the end of the period are assumed to have been converted to common shares at their date

of issuance or the beginning of the period, whichever is later.

g) Cash and Cash Equivalents Cash and cash equivalents consist of bank accounts and overnight deposits with original maturities of three months or less.

h) Property, Plant and Equipment The calculation of depreciation for property, plant and equipment includes assumptions related to useful lives and residual

values. The assumptions are based on management’s experience with similar assets and corporate policies.

Oil Sands Transportation Business Property, plant and equipment in the oil sands transportation business consist of pipelines and related facilities. Depreciation

of capital costs is calculated on a straight-line basis over the estimated service life of the assets, which is 80 years. The cost of

pipelines and facilities includes all expenditures directly attributable to bringing the pipeline to the location and condition

necessary for its intended use, including costs incurred for system construction, expansion and betterments until the assets are

available for use. Pipeline system costs also include an allocation of directly attributable overhead costs and capitalized

borrowing costs. Capitalization of borrowing costs ceases when the related property, plant and equipment is substantially

complete and ready for its intended productive use.

Pipeline line fill and tank working inventory for the Cold Lake, Corridor, and Polaris pipeline systems represent petroleum based

product purchased for the purpose of charging the pipeline system and partially filling the petroleum product storage tanks

with an appropriate volume of petroleum products to enable commercial operation of the facilities and pipeline. The majority

of pipeline line fill for the Polaris pipeline system is owned by the shippers directly. The cost of line fill includes all direct

expenditures for acquiring the petroleum based products. These product volumes will be recovered upon the ultimate

retirement and decommissioning of the pipeline system under the terms of the agreement. Cold Lake and Polaris line fill is

carried at cost and Corridor line fill is carried at cost less accumulated depreciation. Proceeds from the sale of Cold Lake and

Polaris line fill will be fully available to Inter Pipeline, whereas proceeds from the sale of Corridor’s line fill will be used to fund

the cost of any decommissioning obligations and to the extent Corridor’s decommissioning obligations exceed the value of the

line fill, Inter Pipeline will be obligated to fund the excess. To the extent the value of the line fill exceeds the decommissioning

obligation; the excess funds will be refunded to the Corridor shippers. Depreciation of Corridor line fill is calculated on the

same basis as the related property, plant and equipment.

Conventional Oil Pipelines Business Expenditures on conventional oil pipelines system expansions and betterments are capitalized. Maintenance, pipeline integrity

verification and repair costs are expensed as incurred. Depreciation of pipeline facilities and equipment commences when the

pipelines are available for use. Depreciation of the capital costs is calculated on a straight-line basis over the estimated 80 year

service life of the Bow River pipeline system assets and 30 year service life of the Central Alberta and Mid-Saskatchewan

pipeline system assets. These estimates are connected to the estimated remaining life of the crude oil reserves expected to be

gathered and shipped on these pipeline systems. Pipeline line fill and tank working inventory for the conventional oil pipelines

Denotes trademark of Canaccord Genuity Corp.


80 INTER PIPELINE

system represents petroleum based product purchased for the purpose of charging the pipeline system and partially filling the

petroleum product storage tanks with an appropriate volume of petroleum products to enable commercial operation of the

facilities and pipeline. The cost of line fill includes all direct expenditures for acquiring the petroleum based products. These

product volumes will be recovered upon the ultimate retirement and decommissioning of the pipeline system and are carried

at cost.

Bulk Liquid Storage Business The bulk liquid storage business’ property, plant and equipment consist of storage facilities and associated equipment.

Expenditures on expansion and betterments are capitalized, while maintenance and repair costs are expensed as incurred.

Depreciation of the property, plant and equipment is calculated on a straight-line basis over the estimated service life of the

assets, the majority of which ranges from four to 100 years.

NGL Extraction Business Property, plant and equipment of the NGL extraction business are comprised primarily of three NGL extraction straddle plants

and associated equipment. Expenditures on facility expansions, major repairs and maintenance, or betterments are capitalized,

while routine maintenance and repair costs are expensed as incurred. Depreciation of the extraction straddle plants and

additions thereto is charged once the assets are ready for their intended use, and is calculated on a straight-line basis over the

30 year estimated useful life of the assets.

i) Goodwill and Intangible Assets

Goodwill Inter Pipeline has goodwill in four of its CGU’s: the Corridor and Polaris pipeline systems in the oil sands transportation

business and Inter Terminals UK, Germany and Ireland and Inter Terminals Denmark in the bulk liquid storage business. Assets

are grouped in CGU’s which are the lowest levels for which there are separately identifiable cash inflows. Goodwill represents

the excess of the consideration transferred over the fair value of the net identifiable assets of the Corridor, Polaris, Inter

Terminals UK, Germany and Ireland and Inter Terminals Denmark CGU’s. After initial recognition, goodwill is carried at cost less

any write downs for impairment. During each fiscal year and as economic events dictate, management conducts an impairment

test taking into consideration any events or circumstances which might have impaired the recoverable amount. If the carrying

amount of the individual CGU exceeds its recoverable amount, an impairment loss is recognized to the extent that the carrying

amount of the goodwill exceeds its recoverable amount, determined on a fair value less costs of disposal discounted cash flow

basis.

Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, the goodwill associated with the

operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the

operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and

the portion of the CGU retained.

Intangible Assets Inter Pipeline’s intangible assets are amortized using an amortization method and term based on estimates of the useful lives

of these assets.



Cold Lake Transportation Services Agreement

The Cold Lake TSA intangible asset is the estimated value, using a discounted cash flow analysis, of the shipping agreement

entered into with the Cold Lake founding shippers on the Cold Lake pipeline system as valued on January 2, 2003. The term of

the Cold Lake TSA extends until Cold Lake LP gives notice that it forecasts it will earn less than $1.0 million of capital fees in the

year. This intangible asset is being amortized on a straight-line basis over 30 years. The remaining amortization period of the

Cold Lake TSA is approximately 17 years.

Customer Contracts and Relationships

Within the bulk liquid storage business segment, Inter Terminals UK’s intangible assets consist of a customer contract for the

storage and handling of bulk liquid products. This asset is being amortized on a straight-line basis over 30 years. Should the

likelihood of the renewal of the customer contract change, the amortization of the remaining balance would change

accordingly. The remaining amortization period of the customer contract is approximately 20 years.

The NGL extraction business’ intangible assets consist of customer contracts for the sales of ethane and propane-plus.

Contracts include fee-based contracts, cost-of-service contracts and commodity-based arrangements. The value of these

contracts is realized over the term of each agreement, which is the period over which amortization is being charged using the

straight-line method. Should the term of a customer contract change, the amortization of the remaining balance would change

prospectively. The average remaining amortization period of the NGL extraction business customer contracts is approximately

eight years.

Patent

A patented operational process utilized in one of the NGL extraction straddle plants is being amortized on a straight-line basis

over 14 years from the acquisition of the NGL extraction business on July 28, 2004. The remaining amortization period of the

patent is approximately three years.

j) Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset that takes a substantial

period of time to get ready for its intended use are capitalized as part of the cost of the related assets, until such time as the

assets are substantially ready for their intended productive use. All other borrowing costs are expensed in the period in which

they are incurred. Borrowing costs include interest and other costs incurred in connection with the borrowing of funds.

Borrowing costs are amortized over the estimated service life of the assets to which the borrowings relate.

k) Provisions A provision is recognized when it is determined that an obligation has arisen as a result of a past event, the obligation can be

reliably estimated and it is probable that an outflow of economic benefits will be required to settle the obligation. Inter

Pipeline’s provisions represent legal or constructive obligations associated with decommissioning tangible long-lived assets at

the end of their useful lives and loss contingencies, including environmental remediation costs arising from claims,

assessments, litigation, fines and penalties, and other sources.

On initial recognition of a decommissioning obligation, an amount equal to the estimated present value of the obligation is

capitalized as part of the cost of the related long-lived asset and depreciated over the asset’s estimated useful life. Any

subsequent changes to the decommissioning cost estimate or discount rate will result in a similar adjustment to the cost of the

related long-lived asset. The provision will accrete to its full value over time through charges to income, or until Inter Pipeline


82 INTER PIPELINE

settles the obligation. Recoveries from third parties which are virtually certain to be realized are recorded separately and are

not offset against the related provision.

l) Employee Benefits

Long-term Incentive Plans Awards are paid in cash under Inter Pipeline’s Restricted Share Unit Plan (RSUP) and Performance Share Unit Plan (PSUP). The

fair value basis of accounting is used for both plans whereby changes in the liability are recorded in each period based on the

number of awards outstanding and the current market price of Inter Pipeline’s shares plus an amount equivalent to cash

dividends declared to date. Additionally, the valuation of the Performance Share Units (PSUs) incorporates the use of a

performance multiplier, which is determined based on the achievement of two equally weighted, pre-determined, Board

approved performance criteria. The expense is recognized over the vesting periods of the respective awards. Compensation

expense and the long-term incentive liability are adjusted to reflect the use of actual historical forfeiture rates as well as

estimated future forfeiture rates. The market-based value of the award approximates the intrinsic value as the awards have no

exercise price.

Pension Plans The cost of pension benefits earned by certain employees in the UK, Germany and Ireland covered by the defined benefit

pension plans is actuarially determined using the projected unit credit method. Plan assets are measured at fair value for the

purpose of determining the actual return on plan assets. Adjustments for plan amendments are expensed over the vesting

period of the employee benefits. Interest on Inter Pipeline’s pension plan assets is calculated using the same interest rate as

applied for the purpose of discounting the benefit obligation. Actuarial gains and losses arise from changes in assumptions and

differences between assumptions and the actual experience of the pension plans. Actuarial gains and losses are recognized in

full in the period in which they occur in other comprehensive income (OCI). Past service costs are recognized as an expense on

a straight-line basis over the average period until the benefits become vested. If the benefits have already vested, immediately

following the introduction of, or changes to, a pension plan, past service costs are recognized immediately.

m) Income Taxes

Current Income Taxes Certain of Inter Pipeline’s subsidiaries are taxable corporations in Canada and Europe.

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be

recovered from or paid to taxation authorities. The tax rates and laws used to compute the amount are those that are enacted

or substantively enacted, at the reporting date, in countries where Inter Pipeline and its subsidiaries operate and generate

taxable income. The actual amount of income tax expense is final only when the tax return is filed and accepted by relevant tax

authorities, which occurs subsequent to the issuance of the annual consolidated financial statements.

Management periodically evaluates positions taken in Inter Pipeline’s entity tax returns with respect to situations in which

applicable tax regulations are subject to interpretation. Provisions are established if appropriate.

Current income tax relating to items recognized directly in shareholders’ equity is recognized in equity and not the

consolidated statements of net income.



Deferred Income Taxes Inter Pipeline uses the liability method where deferred income taxes are recognized based on temporary differences between

the carrying amounts of assets and liabilities recorded for financial reporting purposes and their tax bases.

Deferred tax assets and liabilities are measured using the tax rates that have been enacted or substantively enacted at the

reporting date. The tax rates are those that are expected to apply in the year the asset is to be realized or the liability is to be

settled. Future changes in tax laws affecting existing tax rates could limit the ability of Inter Pipeline to obtain tax deductions in

future periods.

Deferred tax relating to items recognized outside net income is also recognized outside net income. Deferred tax items are

recognized in correlation to the underlying transaction either in comprehensive income or directly in shareholders’ equity.

Deferred tax assets and liabilities have been offset if a legally enforceable right exists to offset current income tax assets

against current income tax liabilities and the deferred taxes are related to the same taxable entity and the same taxation

authority.

n) Foreign Currency Translation

Foreign Currency Transactions Items included in the financial statements of each of Inter Pipeline’s subsidiaries are measured using the functional currency of

that subsidiary being the currency of the primary economic environment in which that subsidiary operates. Transactions that

are in a currency other than the functional currency of the subsidiary are translated at exchange rates in effect at the date of

the transaction. Monetary assets and liabilities denominated in a foreign currency at the reporting date are retranslated to the

functional currency at the exchange rate in effect at the reporting date with the resulting exchange gains or losses recognized

in the statements of net income.

Foreign Operations The results of all of Inter Pipeline’s subsidiaries that have a functional currency other than the Canadian dollar are translated

into Canadian dollars as follows:

a. All assets and liabilities, including goodwill and other fair value adjustments arising on business combinations, at foreign

exchange rates at the end of the applicable reporting period; and

b. All income and expenses at monthly average exchange rates over the reporting periods.

The resulting translation gains and losses are included in OCI as foreign currency translation adjustments.

Currently only Inter Pipeline Europe Limited (IPEL) and its respective subsidiaries have functional currencies that differ from the

Canadian dollar. Neither IPEL nor any of its subsidiaries operate in hyperinflationary economies. IPEL comprises all of the

operations in the bulk liquid storage business.

o) Asset Impairment

Non-financial Assets Property, plant and equipment and intangible assets with definite lives are tested for impairment when events or changes in

circumstances indicate that the carrying amount may not be recoverable. Goodwill is tested at least annually for impairment

regardless of whether indicators of impairment exist.


84 INTER PIPELINE

For the purpose of measuring recoverable amounts, assets are grouped in CGU’s, which are the lowest levels for which there

are separately identifiable cash inflows. The recoverable amount is the higher of a CGU’s fair value less costs of disposal and

value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax

discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In

determining fair value less costs of disposal, the best evidence of fair value is the value obtained from recent market

transactions or the value stated in a binding sale agreement. If no such transactions can be identified, an appropriate valuation

model is used. These calculations are corroborated by valuation multiples or other available fair value indicators. Inter Pipeline

calculates the fair value less costs of disposal using a projected cash flow model applying a fair value less costs of disposal

discounted cash flow methodology. After-tax cash flows are discounted using a weighted average cost of capital discount rate

that reflects the relative risk of the asset. Projected future cash flows used in the goodwill impairment assessment represent

management’s best estimate of the future operating performance of these businesses at the current time. A significant change

in these assumptions or unanticipated future events could require a provision for impairment in the future which would be

recorded as a reduction of the carrying value of goodwill with a charge against net income.

An impairment test is performed by comparing a CGU’s carrying amount to its recoverable amount. An impairment loss is

recognized to the extent a CGU’s carrying amount exceeds its recoverable amount.

Goodwill acquired through a business combination is allocated to each CGU, or group of CGU’s, that are expected to benefit

from the business combination. A group of CGU’s represents the lowest level within the entity at which goodwill is monitored

for internal management purposes, which may not be higher than an operating segment.

An impairment loss is recognized in the period it occurs. The impairment loss is allocated first to reduce the carrying amount of

any goodwill allocated to the CGU and then on a pro-rata basis to reduce the carrying amount of other assets in the CGU with

an offset to net income. Impairment losses, other than goodwill impairment, are subsequently evaluated for potential reversal

when events or circumstances warrant such consideration.

Financial Assets Financial assets carried at amortized cost are assessed by Inter Pipeline at each reporting date to determine whether objective

evidence of impairment exists. Significant assets are tested for impairment individually then assessed collectively in a group of

assets with similar credit risk characteristics. A financial asset is considered to be impaired if one or more events have occurred

that would impact the estimated future cash flows of that asset. If evidence of impairment exists, an entity recognizes an

impairment loss, the difference between the amortized cost of the financial asset and the present value of the estimated

future cash flows, discounted using the instrument’s original effective interest rate. The carrying amount of the asset is then

reduced by this amount with an offsetting entry to net income. Impairment losses on financial assets carried at amortized cost

may be reversed in subsequent periods if the amount of the loss decreases and the decrease can be objectively related to an

event occurring after the impairment was recognized.

p) Financial Instruments Inter Pipeline may utilize derivative financial instruments to manage its exposure to market risks relating to commodity prices,

foreign exchange and interest rates. Inter Pipeline has a risk management policy that defines and specifies the controls and

responsibilities associated with those activities managing market exposure to changing commodity prices (power, crude oil,

natural gas, and NGL’s) as well as changes within the financial market relating to interest rates and foreign exchange exposure

for Inter Pipeline. Inter Pipeline’s risk management policy prohibits the use of derivative financial instruments for speculative

purposes.

84 INTER PIPELINE





































purposes.

84 INTER PIPELINE





































purposes.



Financial Instruments – Recognition and Measurement “Cash, loans and receivables” and “other financial liabilities” are measured at amortized cost using the effective interest

method of amortization.

Inter Pipeline has classified its financial instruments as follows: Cash and cash equivalents and the majority of accounts

receivable are classified as “cash, loans and receivables”. Dividends payable, the majority of accounts payable, accrued

liabilities and provisions, long-term debt, short-term debt and commercial paper are classified as “other financial liabilities”.

Inter Pipeline capitalizes debt transaction costs, premiums and discounts within long-term debt, short-term debt and

commercial paper.

Financial Instruments – Fair Value Hierarchy Financial instruments recorded at fair value in the consolidated balance sheets are categorized based on the fair value

hierarchy of inputs. The three levels of the fair value hierarchy are described as follows:

Level 1 inputs involve limited use of judgments as fair value inputs are based on unadjusted quoted prices in active markets for

identical assets and liabilities. Inter Pipeline does not use level 1 inputs for any of its fixed rate debt fair value measurements.

Level 2 inputs require slightly more judgment than level 1 but still involve observable and corroborated, either directly or

indirectly, market factors. Inter Pipeline’s level 2 inputs include quoted market prices for interest rates and credit risk

premiums. Inter Pipeline obtains information from sources including independent price publications, third party pricing

services, market exchanges and investment dealer quotes. Inter Pipeline uses level 2 inputs for all of its fixed rate debt fair

value measurements.

Level 3 inputs require the most significant judgments and consist primarily of unobservable or non-market based inputs. Level

3 inputs include longer term transactions, transactions in less active markets or transactions at locations for which pricing

information is not available. In these instances, internally developed methodologies are used to determine fair value which

primarily includes extrapolation of observable future prices to similar locations, similar instruments or later time periods. Level

3 inputs may include items based on pricing services or broker quotes, but the inputs are not observable and cannot be

verified. Inter Pipeline does not use level 3 inputs for any of its fixed rate debt fair value measurements.

q) Financial Guarantees Financial guarantees are issued contracts that require a payment to be made to reimburse the holder for a loss it incurs

because a specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial

guarantees are initially recognized as a liability at their fair value and subsequently measured at the higher of the unamortized

balance of the related fees received and the amount expected to settle at the balance sheet date. As at December 31, 2015,

there were no financial guarantee liabilities recognized.

r) Reserves

Foreign Currency Translation Reserve The foreign currency translation reserve includes exchange differences arising from the translation of the financial statements

of foreign operations.


86 INTER PIPELINE

Defined Benefit Pension Reserve The defined benefit pension reserve includes actuarial gains and losses on defined benefit pension obligations.

s) Leases The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at the

inception date, whether fulfillment of the arrangement is dependent on the use of a specific asset or the arrangement conveys

a right to use an asset. Leases which transfer substantially all the risks and benefits of ownership to Inter Pipeline are classified

as finance leases. The leased asset is recognized at the lower of the fair value of the leased property or the present value of the

minimum lease payments. Finance lease assets are depreciated over the shorter of the estimated useful life of the asset and

the lease term. Other leases are classified as operating leases and payments are amortized on a straight-line basis over the

lease term.

4. FUTURE ACCOUNTING PRONOUNCEMENTS Certain new standards, interpretations and amendments to existing standards were issued by the IASB that are mandatory for

accounting periods beginning on or after January 1, 2016 or later periods with early adoption permitted. The standards

impacted are as follows:

IFRS 15 Revenue from Contracts with Customers (IFRS 15) IFRS 15 replaces IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations and shall be applied to annual

periods beginning on or after January 1, 2018, with early adoption permitted. IFRS 15 establishes a control based revenue

recognition model under which revenue is recognized when control of the underlying goods or services for the particular

performance obligation is transferred to the customer. Inter Pipeline is currently assessing the impact of IFRS 15; however the

extent of the impact has not yet been determined.

IFRS 9 Financial Instruments (IFRS 9) IFRS 9 replaces IAS 39 Financial Instruments: Recognition and Measurement and shall be applied to annual periods beginning

on or after January 1, 2018, with early adoption permitted. IFRS 9 establishes principles for the financial reporting of financial

assets and financial liabilities that will present relevant and useful information to users of financial statements for their

assessment of the amounts, timing and uncertainty of an entity’s future cash flows. Inter Pipeline is currently assessing the

impact of IFRS 9; however the extent of the impact has not yet been determined.

IFRS 16 Leases (IFRS 16) IFRS 16 replaces IAS 17 Leases and shall be applied to annual periods beginning on or after January 1, 2019, with early adoption

permitted. IFRS 16 establishes a single, on-balance sheet accounting model for lessees which will result in the recognition of a

lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the

lease term. Inter Pipeline is currently assessing the impact of IFRS 16; however, the extent of the impact has not yet been

determined.



5. ACQUISITION OF INTER TERMINALS SWEDEN On June 10, 2015, Inter Pipeline completed the acquisition, and thereby obtained control, of four petroleum and petrochemical

storage terminals in Sweden, referred to collectively as Inter Terminals Sweden, from a subsidiary of Koninklijke Vopak N.V.,

through the purchase of 100% of its share capital. The acquisition was valued at $130.9 million, less closing adjustments for

working capital and debt, for total cash consideration of $128.3 million and was funded from Inter Pipeline’s existing credit

facility. The acquisition increases Inter Pipeline’s total storage capacity in Europe by approximately 40% and establishes Inter

Pipeline as the largest independent bulk liquid storage provider in Scandinavia.

Operating results for Inter Terminals Sweden have been included in the consolidated financial statements since June 11, 2015.

Inter Terminals Sweden contributed $30.6 million and $5.4 million to revenue and net income, respectively, from the date of

acquisition to December 31, 2015. If the acquisition had taken place on January 1, 2015, management estimates that Inter

Terminals Sweden would have contributed $50.8 million and $6.7 million to revenue and net income, respectively.

The acquisition was accounted for by the acquisition method as at the closing date of June 10, 2015. Determinations of fair

value often require management to make assumptions and estimates about future events. Changes in any of the assumptions

or estimates used in determining the fair value of acquired assets and liabilities could impact the carrying amounts assigned.

Inter Pipeline has provisionally allocated the consideration transferred, subject to changes in estimates, as follows:

Cash 0.6$ Property, plant and equipment (note 7) 150.4 Non-cash working capita l (note 23) (2.5) Decommiss ioning obl igation (note 11) (7.9) Deferred income tax l iabi l i ty (note 13) (12.3)

128.3$


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NOTESTOTHECONSOLIDATEDFINANCIALSTATEMENTS 89

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88INTERPIPELINE


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NOTESTOTHECONSOLIDATEDFINANCIALSTATEMENTS 89


90 INTERPIPELINE

7. PROPERTY,PLANTANDEQUIPMENTPp ,

F Eqp

Pp LF

CooWokPog To

COSTB,Jy1,2014 5,802.9$ 273.8$ 1,656.8$ 7,733.5$A o/f fooo(1) 1,384.4 14.1 1,220.3 2,618.8Dpo/opoo(1) (8.7) - (1,382.6) (1,391.3)Fogyoj (11.2) - 0.4 (10.8)

B ,Db31,2014 7,167.4 287.9 1,494.9 8,950.2

Aq oofIT Sw(o5) 148.7 - 1.7 150.4A o/f fooo(1) 1,657.4 27.2 332.8 2,017.4Dpo/opoo(1) (21.4) (6.5) (1,662.0) (1,689.9)Fogyoj 99.2 - 0.5 99.7

Balance, December 31, 2015 9,051.3$ 308.6$ 167.9$ 9,527.8$

ACCUMULATED DEPRECIATIONB,Jy1,2014 1,019.0$ 14.9$ -$ 1,033.9$Dpo 122.9 2.9 - 125.8Dpo (3.3) - - (3.3)Fogyoj 0.1 - - 0.1

B ,Db31,2014 1,138.7 17.8 - 1,156.5

Dpo 169.1 2.9 - 172.0Dpo (7.2) - - (7.2)Fogyoj 22.6 - - 22.6

Balance, December 31, 2015 1,323.2$ 20.7$ -$ 1,343.9$

NET BOOK VALUEADb31,2014 6,028.7$ 270.1$ 1,494.9$ 7,793.7$At December 31, 2015 7,728.1$ 287.9$ 167.9$ 8,183.9$ (1) Thjoyofpopy,pqpooo yooowokpogbfo

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NOTESTOTHECONSOLIDATEDFINANCIALSTATEMENTS91

8. GOODWILLANDINTANGIBLEASSETS

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Fogy oj 14.6 0.6 - - 0.6 15.2

Balance, December 31, 2015 352.2$ 402.7$ 8.7$ -$ 411.4$ 763.6$

ACCUMULATED AMORTIZATIONB,Jy1,2014 -$ 155.5$ 5.9$ 1.3$ 162.7$ 162.7$Aozo - 13.9 0.6 2.5 17.0 17.0Dpo - (23.6) - (3.8) (27.4) (27.4)Fogy oj - (0.6) - - (0.6) (0.6)

B ,Db31,2014 - 145.2 6.5 - 151.7 151.7

Aozo - 15.8 0.6 - 16.4 16.4Fogy oj - 0.3 - - 0.3 0.3

Balance, December 31, 2015 -$ 161.3$ 7.1$ -$ 168.4$ 168.4$

NET BOOK VALUEADb31,2014 337.6$ 256.9$ 2.2$ -$ 259.1$ 596.7$At December 31, 2015 352.2$ 241.4$ 1.6$ -$ 243.0$ 595.2$

Goow

IgbATo

Goow Igb

A

)Goow ThygoofgoowoohCooPoppyhopoob

$52.6o$104.3o,py,boh20152014.GoowwogygohCoo

Po CGU’, py, po og qo. Th yg o of goow o o h I TUK,

Gy I, I TDkbk qogbCGU’$68.2o$127.1o,

py(Db31,2014-$61.0o$119.7o,py).

Corridor and Polaris Pipeline Systems Ighfoofpo,f-xoof3.5%6.5%wppof-xhfow

fo h Coo Po pp y, py. Ch fow pojo b o og- o-of-

owh hpp h o pby hoghp oo ooyp fo. Th h fow

h ggg wh ‘ ’. Th p h of h fow byo h h y,

opogg gowh of 1.7% foCoo ogowh foPo. Th kypo owhh h

ooffoofpofohCooPoppyoho

ophfowpojo.


92 INTERPIPELINE

Bulk Liquid Storage Business Goowgohbkqogbhb,ppygf-xoof7.5%of-x

hfowofbohhITUK,GyI,ITDkCGU’.Vobo

h fow pojo h opo b of , opg xp,

xp p xp o 10 y. Th h fow pojo h ggg wh ,

pghofhfowbyohhyopoggowhof2.5%foITUK,

GyIgowhof2.0%foITDk.Thooffoof

pooopoboo.

ThkypobyIPpgfoofpofoow:

Discount Rates

Dophkofhkpf ohCGU,kg oooh

ofoy kof hyghhob opo hhfowfo.Th

o o wgh g o of p (WACC) b o h pf of h CGU. ThWACC

okooppopbqywghg.Thoofqyfohxpk-f

ofpppopqykp,hf-xoofbboxpboowgfo

h CGU. Sg-pf k o o y b o pby b k .

Mgpfo yyby g hWACCo9.0% fo ITDkwh g

ohbo.A,hoboofhCGUbohygo.Mg

o pfo y y fo h Coo, Po, I T UK, Gy, I CGU h

obowgfyhghhhygo.

Revenues

R h Coo Po CGU’ b o og- o poo g wh hpp.

RhITUK,GyIITDkCGU’bog’b

,kgoooxgo,gofow,wkfo.Ag

fozoof1.7%94%hbopooh10yhfowfoof

I T UK, Gy I, py. A g fo of 2.2% g

zoof87%hbopooh10yhfowfoofITDk.Thg

zo fo h I T Dk CGU opo boh po of ogo bkwo b o

ho.

Mgb,Db31,2015,hhoobypobhgyofhkypoh

woohobobghhygo.

b)IgbAO Nob 1, 2015, I Pp h f f of h NGL xo b’ o o

gbfo30yoffhhhofhxgoo.Th

ffofofhogyooo.

Th hg f f ozo xp by $2.4 o 2015 xp o

ozoxpbyppoxy$12.2ofo2016.



9. DIVIDENDSTOSHAREHOLDERSY EDb31

2015 2014D ohho ofIPp 497.1$ 423.1$D whh ofh hPD™DRP (93.5) (264.5)

Ch pohho ofIPp 403.6$ 158.6$D ($ph) 1.4850$ 1.3200$

ADb31,2015,of$43.8owpybo336.4oogooh$0.13p

h(Db31,2014-$39.9opybo326.2oogooh$0.1225ph).

OJy11,2016,IPpof$0.13ph.ThwpooboFby16,

2016, o hhoof oo Jy22, 2016.Th o wppoxy$43.8o.O

Fby9,2016,IPpof$0.13ph.ThwbpooboMh15,2016,

ohhoofooFby23,2016.Thoppoxy$43.8o.

10. LONG-TERMDEBT, SHORT-TERMDEBT AND COMMERCIALPAPER

December 31 Db312015 2014

1,386.2$ 1,279.7$664.0 686.0150.0 300.0

2,625.0 2,325.0Df y() 26.5 -Log-b,ho-bo pp(xgoo o ) 4,851.7 4,590.7L :ho-b,pooofog-bo pp(1) (1,412.7) (1,429.7)Log-b(xgoo o ) 3,439.0 3,161.0

(17.5) (17.0)(1.5) (2.2)1.9 2.2

3,421.9 3,144.0Sho-bpooofog-bgoo o 26.4 150.0Co ppgoo o (1)( ) 1,384.4 1,277.5

4,832.7$ 4,571.5$

Cooyf y()IPp y f y(b)

A:Cpooofoo oLog-b

CooDb ()M-o ()

Too ,ofo zoDo,ofo zo

(1) CoppbyCoofyppogxphwoobppobyhCooyfy

hhopyqDb2019.

) O Db 14, 2015, Coo x h y of h $1,550 o y fy o

Db13,2019,whhbxgoo.

F o o boow fog b o bk’ p 85 b po, wh f o

boowo34bpo(2014–85bpo35bpo,py).IfCoo’

ghg,hfofogoobypo60bpoobypo10b

po,whfowoobypo24bpobypo4bpo.

Thffof2015w1.01%(2014–1.28%)fohCooyfy.

TMDokofCoGyCop.


94 INTERPIPELINE

Fooboowh$25.0ofyhhCooyfywh

woohgbyf.NoowwohfyDb31,2015o2014.

ADb31,2015,oofwhfy(2014-$0.2o).

b) O Db 4, 2015, I Pp x h y of $1,250 o y fy o

Db4,2020,whhbxgoo.

F o o boow fog b o bk’ p 120 b po, wh f o

boowo24bpo(2014–120bpo24bpo,py).IfIPp’

ghg,fofogoobypo105bpoobbypo35

bpo,wh fowo o byp o21bpo byp o7b

po.Thffof2015w2.12%(2014–2.44%).

Fooboow h$40o fy bo hp p20 bpo,

wh boowo o hg by f.Noowwo h fy Db31,

2015o2014.

ADb31,2015, ofof$0.3ow byIPpfy(2014-

$0.4o).

) CooDbfh$150o5.033%SBbh$150o4.897%SC

b.

OFby2,2015,h$150o5.033%SBbwpwhfb

Coo’yfy.

Coo o xhg fx of o fog of o h $150

o5.033%SBb(o20).Thgffh fffo

hoh$150o5.033%SBbof1.67%(2014–1.81%).Thwp

oFby2,2015,owhhyofh$150o5.033%SBb.

Th$150o4.897%SCbFby3,2020,obgobjoh

ooofFby1,2005ppFby2,2010.I

pyb-yq.

Th$150o4.897%SCbbwho,op,hopoofCoop

qohppoob,ppgpbohp

yoy.

) ODb11, 2015, IPp f ho fob hf popwhC goy ho.

Upoohhofobhfpop,IPpyoff,foo:

()ooh;()pfh;()b()bpop(oy,h“S”)

ofpo$3.0bogggoffgpofSgh25ohpohhhofob

hf pop .Syboff pyo ogh, o,p o ob

bokoohoffohooopoppp.Th

hofobhfpopphpoofbyIPpoDb9,2013.



IPphhfoowg-o:

) OFby2,2011,IPp$325oof4.967%S1Fby2,2021,hC

pbbk.ThMTNS1b hof4.967%p,pyb -y

q.

) OJy29,2011,IPp$200oof3.839%S2Jy30,2018, hCpb

bk. ThMTN S 2 b of 3.839% p , pyb -y q

.

) OMy28,2012,IPp$400oof3.776%S3My30,2022,hCpb

bk.ThMTNS3b h of3.776%p,pyb -y q

.

) OJy19,2013,IPp$500oof3.448%S4Jy20,2020, hCpb

bk.ThMTNS4b h of3.448%p,pyb -y q

.

) OMy 30, 2014, I Pp $500o $400o of- o h C

pbbk.Th$500oS5My30,2044,bhof4.637%p,

pyb-y q.Th$400ofogS6My30,2017,

bhhohCDOffRp49bpo,pybqy

.

) OMh23,2015,IPp$300oof-ohCpbbk.

Th $300o S 7 Mh 24, 2025, b h of 3.173% p , pyb -

y q.) OMh10, 2015, IPp’ b I T L I T EOTApS o

PoSg20ofyfogopowokgpppo.Thfyhofx

pyo.FwPoSgbhLooIbkOff

Rp100 bpo fw Eob hEo IbkOffRp100 b

po.


96 INTERPIPELINE

11. PROVISIONSDo og Eo

Ob g o Lb To B,Jy1,2014 46.5$ 18.6$ 65.1$R o o oof b 0.1 (0.1) -Aoxp 2.3 0.3 2.6Fogyj (0.8) (0.2) (1.0)B ,Db31,2014 48.1 18.6 66.7

Aq oofIT Sw(o5) 7.9 - 7.9R o o oof b 7.6 0.7 8.3Aoxp 2.1 0.7 2.8Fogyj 3.6 0.3 3.9

Balance, December 31, 2015 69.3$ 20.3$ 89.6$

Th foowg of xp oo f fo w o h o o of

xpxpobooogofppy,bkqog

NGLxopoofkowob.Thog-k-fw

oohfhfowfooogobgoh5o10yk-fwooh

fhfowfoob:

Exp Log-T 5o10YEoo Rk-F Rk-F

B Sg L f(y)(1) IfoR DoR DoRO poo 80o500(2) 1.8% 3.1% /Coo o pp 40o500(2) 1.8% 3.1% 1.6%o2.5%Bk q og 30o40 1.2%o2.4% 3.0%o3.7% 0.6%o1.85%NGLxo 40 1.8% 3.1% /

(1) Eobbgo5o10y.

(2) ThxpoofofhCoLk,Coo,PoBowRppy80o500y.Th-poof290yhoogobgo.

Ioohbopoo,$10.3o opyb,bpooo

ooowokDb31,2015(Db31,2014-$50.1o).

12. EMPLOYEEBENEFITSDecember 31 Db31

2015 20145.7$ 8.5$

14.6 11.6Epoybf 20.3$ 20.1$P o b yLog-p b y

) Log-TIPLby

Restricted Share Units EffJy1,2006,IPppLTIPfopoy,off,o.ThLTIPgoby

RSUPohfhowwhRSUPwb.ARShU

(RSU), g h RSUP, b o I Pp’ h p p fo h p o

hhoghpohRSUh.Uohwpogg,hRSUw

o-hohof h y fohofg.Th fofRSUg hy.Upo

xofRSU,hoowgwbpohofppbwhhogx.



ADb31,2015,hpooofhby opyb,bpoow

$12.8o(Db31,2014-$22.9o).ADb31,2015,490.7hoRSUxb.IPp’

fypgoghpDb31,2015,w$22.46.

Th o ofRSUoxDb31,2015w$12.1o (Db31,2014 -

$21.1o).

Thwghggo fofhogRSUDb31,2015,w1.5y(Db

31,2014-1.5y).

FohyDb31,2015,RSUoof$1.4owopgxp$1.0ow

gxp(2014-$7.6o$22.7o,py).

ThfoowgbzhofIPp’RSUDb31,2015,Db31,2014:

(thousands) Number of RSUsBa lance, January 1, 2014 1,132.2 Granted 637.2 Exercised (580.1) Forfei tures (46.9) Ba lance, December 31, 2014 1,142.4

Granted 459.6 Exercised (580.9) Forfei tures (35.3) Balance, December 31, 2015 985.8

Performance Share Units Effective January 1, 2015, Inter Pipeline implemented a PSUP for its officers. The PSUP is governed by a PSUP document that

defines how PSU awards will be determined and administered.

A PSU is valued based on the 20 trading day volume weighted average price of Inter Pipeline’s common shares, plus an amount

equivalent to cash dividends paid to date, and a performance multiplier. The performance multiplier is determined based on

the achievement of two equally weighted, pre-determined, Board approved performance criteria as follows:

a) Total relative shareholder return which is measured by Inter Pipeline’s share price performance, including dividends

paid to shareholders, relative to the performance of Inter Pipeline’s Canadian infrastructure peer group; and

b) Funds from operations attributable to shareholders after sustaining capital per share which is measured based on Inter

Pipeline’s performance relative to a pre-determined target.

The PSUP has been structured to allow payouts of up to two times the initial grant value in the event of extraordinary

performance. Conversely, a payout of zero could result if certain thresholds are not met during the three year performance

period.

The PSUs will cliff vest at the end of a three year performance period unless otherwise provided in an individual grant

agreement or employment contract. Upon vesting of a PSU, the amount owing will be paid out in cash net of applicable

withholding taxes.

Inter Pipeline’s 20 trading day volume weighted average share price at December 31, 2015, was $21.65.

The weighted average remaining contractual life of the outstanding PSUs as at December 31, 2015, was 2.0 years.


98 INTER PIPELINE

For the year ended December 31, 2015, PSU costs of $0.8 million were included in general and administrative expenses.

The following table summarizes the status of Inter Pipeline’s PSU’s as at December 31, 2015, and December 31, 2014:

(thousands) Number of PSUsBa lance, December 31, 2014 - Granted 113.1 Exercised (3.6) Balance, December 31, 2015 109.5

b) Pension Liability Inter Pipeline acquired Inter Terminals UK and Ireland on October 4, 2005 and Inter Terminals Germany on January 1, 2006. At

the time of acquisitions, the fair values of the pension plan liabilities were recognized on Inter Pipeline’s consolidated balance

sheet and there were no unrecognized gains or losses.

UK Inter Pipeline operates a defined benefit funded pension plan (Pension Fund), providing benefits for its employees based

primarily on years of service and final pensionable salary. The Pension Fund is administered by a corporate trustee and its

assets are independent of Inter Pipeline’s finances. The most recent actuarial valuation of the Pension Fund was carried out as

at April 6, 2013. Professionally qualified actuaries performed the actuarial valuation and then adjusted and updated the results

to the reporting date, with the obligation measured using the projected unit method. The Pension Fund was closed to new

entrants from September 30, 2010. At the same time, a change was made to the Pension Fund’s rules, which restricts the level

of future increases in pensionable salaries to the lower of price inflation and 5.0% each year. This change came into effect on

April 6, 2011. The next valuation date for funding purposes is April 6, 2016.

Germany The German benefit plans included in Inter Pipeline’s financial reporting relate to defined benefit retirement pensions and long-

service awards. The German arrangements are unfunded and therefore have no assets. The most recent actuarial valuation of

the long-term employee and post-retirement benefits under local tax and accounting rules was carried out as at December 31,

2015, by professionally qualified actuaries. For Inter Pipeline's financial reporting purposes the defined benefit obligations are

calculated on a triennial basis by independent actuaries using the projected unit credit method, with approximate updates in

interim years.

Ireland Inter Pipeline operates a defined benefit funded pension plan (Pension Scheme), which provides benefits for its employees

based on years of service and final pensionable salary. The Pension Scheme is administered by a corporate trustee and its

assets are independent of Inter Pipeline’s finances. The most recent actuarial valuation of the Pension Scheme was carried out

as at September 1, 2013. Professionally qualified actuaries performed the actuarial valuation with the obligation measured

using the projected unit method. With effect from September 1, 2010, the Pension Scheme was closed to future benefit

accrual. The next valuation date for funding purposes is September 1, 2016.



Plan Assets The pension plans’ assets are not Inter Pipeline’s assets and therefore are not included in the consolidated balance sheets.

Assets are shown at market value using the bid price. The actual distribution of the respective pension plan assets as of

December 31 is as follows:

Pension Plan Assets byAsset Category 2015 2014 2015 2014 Equity securi ties 41.6% 42.0% - - Debt securi ties 36.6% 37.4% - - Real estate 21.4% 19.9% - - Deferred a nnuity contract 0.4% 0.7% 100.0% 100.0%Total 100.0% 100.0% 100.0% 100.0%

UK Ireland

Actuarial Assumptions The significant actuarial assumptions adopted in measuring Inter Pipeline’s accrued benefit obligations are as follows:

Weighted Average Assumptionsfor Expense 2015 2014 2015 2014 2015 2014

Discount rate 3.8% 3.7% 2.2% 1.8% 2.6% 2.3%Rate of price inflation 3.0% 3.1% 2.0% 2.0% 1.8% 2.0%Compens ation increase 2.9% 3.0% n/a n/a n/a n/aRate of pens ion payment increase 2.9% 3.0% 1.5% 1.5% 2.8% 2.8%

UK Germany Ireland

Funded Status and Defined Benefit Obligations The following tables set forth the respective pension plans’ funded status and amount included in the accrued liability on Inter

Pipeline’s consolidated balance sheets.

Change in Accrued Benefit Obligation UK Germany Ireland Tota l UK Germany Ireland Tota l

Accrued benefi t obl igation, beginning of year 118.8$ 1.6$ 1.1$ 121.5$ 100.0$ 1.2$ 1.0$ 102.2$ Current service cost 2.4 - - 2.4 2.0 - - 2.0 Employee contributions 0.3 - - 0.3 0.3 - - 0.3 Interest cost 4.7 - - 4.7 4.7 0.1 - 4.8 Benefits pa id (2.5) (0.1) - (2.6) (2.7) (0.1) - (2.8) Actuaria l loss (ga in) due to: Changes in financial assumptions 0.3 (0.1) - 0.2 12.0 0.5 0.1 12.6 Changes in demographic assumptions - - - - - - - - Experience adjustments - 0.2 - 0.2 - - - - Curta i lments and settlements - - (0.9) (0.9) - - - - Foreign currency adjustments 15.7 0.1 - 15.8 2.5 (0.1) - 2.4 Accrued benefi t obl igation, end of year 139.7$ 1.7$ 0.2$ 141.6$ 118.8$ 1.6$ 1.1$ 121.5$

December 31, 2015 December 31, 2014


100 INTER PIPELINE

Change in Pension Plan Assets UK Germany Ireland Tota l UK Germany Ireland Tota l

Fa i r va lue of pens ion plan assets , beginning of year 108.7$ -$ 1.2$ 109.9$ 94.8$ -$ 1.2$ 96.0$ Interest on plan assets 4.3 - - 4.3 4.5 - 0.1 4.6 Actua l return less interest on plan assets (1.2) - - (1.2) 7.1 - - 7.1 Running costs (0.4) - (0.4) (0.4) - - (0.4) Employer contributions 3.0 0.1 - 3.1 2.8 0.1 - 2.9 Employee contributions 0.3 - - 0.3 0.3 - - 0.3 Benefits pa id (2.5) (0.1) - (2.6) (2.8) (0.1) - (2.9) Assets di s tributed on curta i lments and settlements - - (0.7) (0.7) - - - - Foreign currency adjustments 14.3 - - 14.3 2.4 - (0.1) 2.3 Fa i r va lue of pens ion plan assets , end of year 126.5$ -$ 0.5$ 127.0$ 108.7$ -$ 1.2$ 109.9$

Pens ion (l i abi l i ty) asset (13.2)$ (1.7)$ 0.3$ (14.6)$ (10.1)$ (1.6)$ 0.1$ (11.6)$ December 31, 2015 December 31, 2014

December 31, 2015 December 31, 2014

13. INCOME TAXES On June 18, 2015, the Government of Alberta announced legislation which increased the general provincial corporate income

tax rate from 10% to 12%, effective July 1, 2015. The result of this increase in tax rate is a $35.9 million increase in deferred

income tax liabilities.

On October 26, 2015, tax legislation was substantively enacted in the UK which will reduce the statutory income tax rate from

20% to 19%, effective April 1, 2017, and from 19% to 18%, effective April 1, 2020. The effect of recognizing these UK income tax

rate changes was a $2.8 million reduction in deferred income tax liabilities.

The major components of income tax expense for the years ended December 31, 2015 and 2014 are as follows:

December 31 December 312015 2014

Current i ncome taxes Current income tax charge 71.5$ 41.4$ Adjustments in respect of current income tax of the previous year (1.5) 4.0 Current i ncome tax 70.0 45.4 Deferred income taxes Relating to the origination a nd reversa l of temporary di fferences 83.1 73.1 Adjustments in respect of deferred i ncome tax of the previous yea r 1.2 (3.5) Adjustments to deferred tax attributabl e to changes in tax rates and laws 33.1 - Deferred income tax 117.4 69.6 Provi s i on for income taxes 187.4$ 115.0$

Income taxes recognized directly in shareholders’ equity are as follows: December 31 December 31

2015 2014Deferred income tax (expense) recovery on defi ned benefi t pensi on reserve (0.2)$ 1.1$ Deferred income tax recovery on share i s sue costs - 2.5 Current i ncome tax recovery on share is sue costs - 0.6 Income tax recognized in Shareholders ' Equity (0.2)$ 4.2$



The provision for income taxes is summarized by jurisdiction as follows: December 31 December 31

2015 2014Current i ncome taxes

Canada 65.7$ 43.8$ Europe 4.3 1.6

70.0 45.4 Deferred income taxes

Canada 119.3 71.4 Europe (1.9) (1.8)

117.4 69.6 187.4$ 115.0$

The components of income before income taxes are summarized below:


Canada 590.3$ 423.6$ Europe 60.1 40.9

650.4$ 464.5$

Income tax expense varies from amounts computed by applying the Canadian federal and provincial statutory income tax rates

to income before income taxes as shown in the following table:


Income before income taxes per consol ida ted financia l s tatements 650.4$ 464.5$ Income before income taxes attributa ble to non-control l ing interest (35.7) (14.7) Adjusted income before income taxes 614.7 449.8 Tax rate 26.0% 25.0%

159.8 112.5

(7.9) (4.4) 33.1 -

2.4 6.9 Provi s i on for income taxes 187.4$ 115.0$

Deductibl e intercompany interest expenseImpact of tax rate cha ngesOther

The tax rates used in the reconciliation above are the combined federal and provincial tax rates payable by Inter Pipeline in

Canada.

Deferred income taxes relate to the following temporary differences:

December 31 December 31 December 31 December 312015 2014 2015 2014

Property, plant and equi pment (660.0)$ (522.4)$ (117.1)$ (82.9)$ Non-capita l losses 102.1 103.7 (2.3) 7.8 Goodwi l l and intangible assets (84.4) (89.8) 5.2 (4.5) Provi s i ons 21.4 24.7 (2.9) 10.8 Other 2.9 2.5 (0.3) (0.8)

Deferred income tax expense (117.4)$ (69.6)$

Net deferred tax l iabi l i ty (618.0)$ (481.3)$

Consolidated Balance SheetsConsolidated Statements of

Net Income


102 INTER PIPELINE

Reconciliation of net deferred income tax liabilities: 2015 2014

Balance, January 1 (481.3)$ (415.4)$ Tax expense recognized in net income (117.4) (69.6) Tax recovery recognized i n equity - 2.5 Tax recovery recognized i n OCI (0.2) 1.1 Acquis i tion of Inter Terminals Sweden (note 5) (12.3) - Revaluation of foreign deferred income tax l iabi l i ties and other (6.8) 0.1

Ba lance, December 31 (618.0)$ (481.3)$

Deferred income tax assets and liabilities are recognized for temporary differences between the carrying amount of the

consolidated balance sheet items and their corresponding tax values as well as for the benefit of losses available to be carried

forward to future tax years that are likely to be realized. The amount of unrecognized losses at December 31, 2015 is $6.8

million (2014 - $8.3 million).

14. SHAREHOLDERS’ EQUITY

Authorized

Unlimited number of common shares, with voting rights and no par value.

Class A preferred shares, limited to not more than 20% of the number of issued and outstanding common shares, with no

voting rights.

Issued, Fully Paid and Outstanding Number of Share

(millions) Common Shares Capita lBala nce, January 1, 2014 306.8 3,096.7$ Is sued under Premium Dividend™ and Dividend Rei nves tment Plan 9.0 264.5 Common shares i s sued, net of i s sue costs 10.4 291.2 Stated capita l adjustment - (1,026.5) Ba la nce, December 31, 2014 326.2 2,625.9

Is sued under Premium Dividend™ and Dividend Rei nves tment Plan 3.1 93.5 Exchanged from converti ble shares 7.1 170.0 Balance, December 31, 2015 336.4 2,889.4$

Convertible Shares In January 2015, as a result of successful completion of transportation infrastructure related to the Foster Creek and Christina

Lake expansion projects, the $170 million second instalment, recorded as a current liability at December 31, 2014, and

consisting of 7.1 million convertible shares, was satisfied when the convertible shares were converted on a one-for-one basis

into common shares of Inter Pipeline. The common shares were recorded as shareholders’ equity in January 2015.

Premium DividendT M and Dividend Reinvestment Plan Effective August 6, 2015, Inter Pipeline reduced the dividend reinvestment discount of the Premium DividendTM and Dividend

Reinvestment Plan from 2% to 0%.

TM Denotes trademark of Canaccord Genuity Corp.



Calculation of Net Income per Common Share

Years ended December 31(millions, except per share amounts) 2015 2014Net income attributable to shareholders - bas ic and di luted 427.4$ 334.8$ Weighted average shares outstanding – bas ic 334.6 320.2 Effect of Premium Dividend™ and Dividend Reinvestment Plan 0.2 0.5 Effect of convertible shares - 7.1 Weighted average shares outstanding – di luted 334.8 327.8 Net income per common share a ttributable to shareholders – Bas ic 1.28$ 1.05$ Di luted 1.28$ 1.02$

Reserves Reserves are summarized as follows:

Ba la nce, January 1, 2014 67.5$ (13.2)$ 54.3$ Other comprehens ive loss (15.2) (4.4) (19.6) Ba la nce, December 31, 2014 52.3 (17.6) 34.7

Other comprehens ive income (loss ) 81.0 (1.8) 79.2 Balance, December 31, 2015 133.3$ (19.4)$ 113.9$

ForeignCurrency

Trans lationReserve

DefinedBenefi t

Pens ionReserve

Tota lReserves

15. NON-CONTROLLING INTEREST Summarized information on the consolidated balance sheets and results of operations relating to the 15% non-controlling

interest in Cold Lake, which has its principal place of business in Calgary, Alberta, are as follows:


Current assets 6.7$ 7.0$ Non-current assets 331.6 328.7 Current l iabi l i ties (2.7) (9.2) Non-current l i abi l i ties (0.1) -

335.5$ 326.5$

December 31 Dcmb312015 2014

Rvu 51.5$ 25.6$Ex (15.8) (10.9)

Cuicmx (0.1) -

iicmdcm ivicm 35.6$ 14.7$

ADcmb31,2015,ucbligildCldLklld$66.7milli.Iddii,w$217.7milli

cmmim ucy,ldquim ld Iili’85% i i CldLkiy.

Tcmmimducbligiicluddilcmmimdcigcidicldi7d17.

TMDdmkCccdGuiyC.


104 INTERIELINE

16. RELATEDARTYTRANSACTIONSIiliwllywumbubidiilcdiCddEudw85%iiwubidii

lcdiCd(2014–100%iiCddEud85%iiwubidiilcdiCd).

NvuwdmldiyddDcmb31,2015d2014.

KyMgmlTlcmiBdDicdiccidllwigydd:


S-mmlybi (1) 4.0$ 9.6$S-bdym (2) (0.6) 12.3T l cmi(3) 3.4$ 21.9$

(1) S-mmlybicibly,uldbudmlycibui-mybi.

(2) S-bdymcicmi(cvy)xcgizdRSUdSUudigyddRSUxcidbykymgmlduigy(12dicuiRSUdSU).T$0.6millicvyi2015iimilydudciIili’ic.

(3) mlymbi, lg-mbidmiibilicbl Iili’kymgml i yddDcmb31,2015d2014.

17. COMMITMENTSANDCONTINGENCIESO Ju 15, 2007, I ili d i gm wi Cid i gu ym d

mcllbligi,ymbwdmuimilicilbligi,Cid

(iiIili)ivuiudCidFSAdldgm.

TgumybxcidivCid,Iili,(iiIili)

ilymucbligiy.

Iiliucbligicmmimligximly$185.1milliDcmb31,2015.

MiimumLymIilidilgmicc,g,y,ldquimdldid

gigm20162094.Cilcixidwli.Tuumiimumullym

lcmmim:

25.5$

97.9

216.4

339.8$

L y

Oivy

Aivy



18. CAITALDISCLOSURESI ili’ cilmgm bjciv ligdwi i cmmcil gi d i lg-m ulk

bui.Timybjcivmii(i)blcdividdldvcmicdiduycycl;(ii)

lxiblcilucuwicimizccilwiiccbllvlik;d(iii)ivmgd

cdiig.

Cil ud mgm iclud lg-m db, -m db d cmmcil (xcludig dicu d

ci c) d ld’ quiy. Mgm mg cil ucu d mk djum bd

cgicmiccdiidikcciicudlyig.Idmiimdiycil

ucu, Iilimydjulvlcdividdidld, iuwcmmd,

iuwdb,gixiigdbm,yxiigdb.

Iilimii lxibiliy i icil ucuudgwcildcquiiigmugumk

diduycycl.Iilijciudigquimuiucicigvilbl

muuicilbligidcilgm.Iiligllylicmmidcdiciliidud

m i i xc dividd ic gig cil quim. A Dcmb 31, 2015, I ili d

cccmmidcdiciliilig$2,800.0milli,wic$749.8millimiduuilizd.Iilil

dccdmdcilii$105.8milli,wic$79.0millimiduuilizd.Ciuuilizdmuud

ciliivilblciicubidiiIili.

Tkig uumk d i cidi, Iili gully c iil quim dxcd

ud m i u uici udig i vilbl uu uiig cil gm d dividd

ld.

Iiliwcmliwilldbcvugucidd.

19. FINANCIALINSTRUMENTS

) CliiciFicil AdFicilLibiliiTcyigvluIili’icildlibiliicddDcmb31,2015,cliidllw:

C,L d

Rcivbl

OFici l Libi l i i

CyigVluFici l

ALibi l i y

N-Fici l ALibi l i y(1)

CyigVlu

ALibi l i y

A (2)

Cdcquiv l 40.3$ -$ 40.3$ -$ 40.3$Accu civbl 173.7 - 173.7 9.4 183.1 idx dd i 2.1 - 2.1 24.8 26.9

Libi l i iDividd ybl -$ 43.8$ 43.8$ -$ 43.8$Accu ybl,ccudl ibi l i i dvi i - 166.1 166.1 54.5 220.6Ddvudl ibi l i i - - - 18.2 18.2Lg-mdb,-mdbdcmmci l (10)(3) - 4,851.7 4,851.7 - 4,851.7

(1) Nllcmdlibiliimdiiiicillibiliy.

(2) Iilidvymdiii“ivluugil”,“vilbl--l”“ld--muiy.”

(3) Cyigvluicludcmmcildxcluddicudcicwicivccumuldmizi.


106 INTERIELINE

b) FiVluFixdRDbADcmb31,2015,cyigvluixddbcmdivlullw:

CyigVlu(1) F iV lu150.0$ 164.9$

2,225.0$ 2,242.3$CidSi CdbuMdium-m Si 1,2,3,4,5d7 (1) Cyigvluxcludcic,dicudccumuldmizi.

Timdivluixd dbbdmidbdvilblmk imidi

vlui md, icludig u dicud uu c lw uig cu imil icil ium

ubjcimilikdmuii.Tculmulizdmydimim.

20. RISKMANAGEMENTIiliixdumbiicilikiigimlcuiwicicludmk

ikldi,cmmdiyicdigcucyxcg,cdiikdliquidiyik.

) MkRikMk ik i ikuciy ivlu icil ium, uuc lwdig I

iliwilllucudumvmimk.Iilimyuilizdiviviciliummg

i xu mk ik lig cmmdiy ic, i d ig xcg. I ili ik

mgm licy i lc di d cii cl d ibilii cid wi civii

mgigmkxucgigcmmdiyic(w,cudil,ulg,dNGL)wllcgwii

icilmkligidigxcgxuIili.Iili’ikmgm

licyibiudiviviciliumculivu.

Illwigci,iiviylydvididicimuildcgi

viblmyvicmdbdlg-mdb,-mdbdcmmciludig

Dcmb 31, 2015. T ly yicl d uld b cidd b diciv uu mc.

Cgiivlugllycbxldbdviblbculiiwiviblmy

bli.Iliy,cgiviblmymgiycucimcviblwicmyuli

igiiclydicclui.

Power Price Risk Management I ilimy i lciciy ic w cc mg w ic ik xu i cvil il

ilibui.Iilimyliicilwccmgwicikxui

NGLxcibui.ADcmb31,2015,lciciyicwicwgm

udig.

Frac-spread Risk Management Iiliixdc-dikwicilivicdiilbwlNGLducdd

uc ikggud lc c mvdduig xci NGL mulg

m.Diviviciliumuilizdmgc-dik.



IilimyiNGL,AECOulg,digxcgwccmgc-dikxu

i NGL xci bui. A Dcmb 31, 2015, w c-d dg udig, wv, I

ilimydciddgiikiuu.

Interest Rate Risk Management Iikiikivluuuclwiciliumwilllucuulcg

imki.Iilimgiiikbyblcigixuixddviblwil

miimizigic.Wdmdi,Iilimyiiwgmmg

iiicikxu.

Iili’ixd--ligiw$150milli5.033%SiBCiddbuwmid

Fbuy2,2015,ccuwimuiy$150milli5.033%SiBdbu.

Iili’xuiikimilylilg-mdbbligidivluilig--

ixdiwgm.Sicixdlg-mdbicidmizdcivlu,

cyig vlu i db i ubjc i ik. Sic i vlu gi d l ixd--lig

i wgm by lg-mybl lg-m civbl, i i ik

gm.

BdvibldbbligiudigDcmb31,2015,1%cgiiidwuld

v cgd i x y dd Dcmb 31, 2015, by ximly $24.8milli umig ll

vibl mi c. O i mu, $13.9 milli y dd Dcmb 31, 2015, l Cid

ydicdcdi ciliy (10)d icvblugmCidFSA;, -x icm

imcyddDcmb31,2015wuldb$8.1milli.

Foreign Exchange Risk Management IiliixdcucyikuligmlidlibiliiiEubdubidii

dcilcucyxuiigmucicuciIili’ucilcucy,

Cdidll.Tciligcucyikxuvbigiiciiclly,glly

dgd;wv, Iilimydcid dg i ik i uu.ADcmb31,2015, ig

xcgdgudig.

b) CdiRikCdixuiciliumimcuy’ibiliyuwilligulillibligiI

ili. Iili’cdiikxulimilycum(ccucivbl)dicilcui

ldigcddivivicil ium. Iili’xucdiikimdulcum

cuy’ bligi, wi mximum xu qul cyig mu ium. Cdi ik i

mgdugcdivldmiigcdu.

Wiccdiikiigmc,diddivivicil ium, Iiliblivik

-mc cui miiml c, di d diviv icil ium udig

dmilyldwimjiciliiuiivmgdci.

ADcmb31,2015, Iilicid ik-mc i cum imiimlbd I

ili’ cdi vl, gigmiig cdu d iicl xic. T cdiwi m k


108 INTERIELINE

iccuvilblquliivdquiiv imibucuy icludig,bu limid, icil

udxl cdi ig.Ddig ucmcm, gu m mcdi

cmmyb qud cuiy. Iilim miig ixubyig iccwi

cummymiigilIililikducikidd/llwmii

ccccuccivdul.Ecbuigmmiudigccucivbl

gigbi.

Accucivbldmddu i ygdg60dydciddb imid i

mvvccudwuldimcimduuclw.ADcmb31,2015,ccu

civbludigmigdiiiiduimidiigiic.

Ccicdiikcidwiccu civbll limidumbicilcum i il

d i d NGL xci bui gm, mjiy wic ilid wi ivm gd

ciigydcmicliduyc.ADcmb31,2015,ccucivblcidwiw

buigmw$130.7milli71.4%lccucivbludig.Iiliblivcdiik

cidwimidccucivblimiimizddudiviycbuigmdcum.

c) LiquidiyRikLiquidiy ik i ik uibl uc vilbl ud bui i, cmmcil gi m

icilbligi(17cmmimdcigcid18cildiclu).Tblblw

ummizcculmuiyil Iili’ icil libiliiDcmb31,2015,udicud

bi:

T l L TOY

OFivY

AFivY

Dividd ybl 43.8$ 43.8$ -$ -$Accu ybl,ccudl i bi l i i dvi i 220.6 220.6 - -Ddvudl ibi l i i 18.2 7.5 6.3 4.4Lg-mdb,-mdbdcmmci l (1) 4,851.7 1,412.7 1,914.0 1,525.0

5,134.3$ 1,684.6$ 1,920.3$ 1,529.4$ (1) CmmciliudbyCidiullyuddmgmxciwillciubudbyCidydicdcdiciliy

ymquimuilDcmb2019.

21. FINANCINGCHARGESDecember 31 Dcmb31

2015 2014Ixcdi ci l i i 35.0$ 37.9$Ilyblivlcmld - 14.5ICidDbu 7.6 10.1Imdium-m 92.3 73.9Tl I 134.9 136.4Ci l i zdi 0.7 (49.3)Amizicic lg-mdb,-mdbdcmmci l 3.3 3.8Accivi i d iludigcg 3.2 2.7Ficigcg 142.1$ 93.6$



22. EXENSESBYNATUREDecember 31 Dcmb31

2015 2014Fuldw 99.4$ 111.4$Exlvic 83.2 79.2Emlyc 95.7 116.0yx 35.5 30.1Milduli 38.0 34.1Tidg 79.2 67.4O 13.3 15.6Tlxbyu 444.3$ 453.8$Allcd:Oig 381.3 367.9Glddmiiiv 63.0 85.9

444.3$ 453.8$

23. SULEMENTALCASHFLOWINFORMATION

CgiN-CWkigCil December 31 Dcmb31

2015 2014Accucivbl (26.3)$ 89.5$Cuicmxcivbl 11.5 (11.5)idxddi 4.4 14.3Dividdybl 3.9 7.0Accuybl,ccudlibiliidvii (169.2) (184.1)Cuicmxybl 29.6 (31.2)Ddvu (11.3) 12.0Wkigcilcquid(5) (2.5) -Imcigxcgdicd (0.3) -Cgi-cwkigcil (160.2)$ (104.0)$

Tcglllwigcivii:Oig (13.6)$ 7.7$Ivig (151.0) (118.8)Ficig 4.4 7.1Cgi-cwkigcil (160.2)$ (104.0)$

CdCEquivlDecember 31 Dcmb31

2015 2014Cddbk 35.3$ 56.5$S-md i 5.0 4.6

40.3$ 61.1$


110 INTERIELINE

24. JOINTOERATION

50%I iEmVExciFcil iySummizd imi ul icil ii d i lig I ili’ 50% i i

EmVxciciliy:


Cu 8.9$ 13.9$N-cu 87.5 91.9Cul ibi l i i (6.6) (12.8)N-cul i bi l i i (0.8) (0.8)i 89.0$ 92.2$

December 31 Dcmb312015 201482.7$ 127.0$

(75.3) (119.3)iicmdcm ivicm 7.4$ 7.7$

RvuEx

TicillcbuiijiiiClgy,Alb.ADcmb31,2015,wcmmim

ucy,ldquimducbligildIili’iijilyclld

EmVxciciliy.

25. MAJORCUSTOMERSI2015,mjcumildibuidmjcumNGLxcibui

ccud30%(2014-wmjcumNGLxcibuiccud30%)Iili'

cliddvu.Iiliblivicilikcidwicumimiiml.

EXECUTIVE TEAM

Christian Bayle

President & Chief Executive Officer

David Fesyk

Executive Vice Chairman

Brent Heagy

Chief Financial Officer

Jim Arsenych

Chief Compliance Officer

James Madro

Senior Vice President, Operations

Jeffrey Marchant

Senior Vice President, Transportation

Anita Dusevic Oliva

Vice President, Legal

Cory Neufeld

Vice President, Oil Sands Pipeline Development

Bernard Perron

Vice President, Project Development

Jeremy Roberge


Spil Kousinioris

Vice President, Corporate Development

BOARD OF DIRECTORS

Richard Shaw*

Director, Chairman of the Board

Calgary, Alberta

David Fesyk

Director, Executive Vice Chairman

Calgary, Alberta

Lorne Brown*

Director, Chairman of the EH&S Committee,

Member of the Audit Committee

Oro Valley, Arizona

Duane Keinick*

Director, Chair of the Compensation Committee,

Member of the Governance and EH&S Committees

Calgary, Alberta

Brant Sangster*

Director, Member of the Audit and EH&S Committees

Calgary, Alberta

Margaret McKenzie*

Director

Calgary, Alberta

Alison Taylor Love*

Director, Chair of the Governance Committee,

Member of the Compensation Committee

Calgary, Alberta

William Robertson*

Director, Chair of the Audit Committee,

Member of the Compensation and Governance Committees

Calgary, Alberta

* denotes independent director

C O R P O R AT E I N FO R M AT I O N

HEAD OFFICE

Inter Pipeline Ltd.



Telephone: (403) 290 6000

Fax: (403) 290 6092

Toll Free: 1 (866) 716 PIPE (7473)

Emergency (24hr): 1 (800) 727 7163


REGISTRAR AND TRANSFER AGENT

Computershare Trust Company of Canada

#600, 530 - 8th Avenue S.W.

Calgary, Alberta, Canada, T2P 3S8

Telephone: 1 (800) 564 6253


AUDITORS

Ernst & Young LLP Chartered Accountants

1000, 440 – 2nd Avenue S.W.

Calgary, Alberta, Canada, T2P 5E9

STOCK EXCHANGE LISTING

Common Shares trade under the symbol IPL

on the Toronto Stock Exchange (TSX)

INVESTOR AND MEDIA RELATIONS

Jeremy Roberge



Telephone: (403) 290 6015

Breanne Feigel

Manager Corporate Communications


Telephone: (587) 475 1118

ABBREVIATIONS

bbls Barrels

bcf Billion cubic feet

bcf/d Billion cubic feet per day

b/d Barrel(s) per day

GJ Gigajoule

km Kilometre

$ MM Millions of dollars

mmcf Million cubic feet

mmcf/d Million cubic feet per day

MW Megawatt

MWh Megawatt hour

C O N TAC T S

Inter Pipeline is a major petroleum transportation, natural gas liquids extraction,

and bulk liquid storage business based in Calgary, Alberta, Canada. We own and

operate energy infrastructure assets in western Canada and Europe. Each day,

Inter Pipeline transports, processes and handles 2.2 million barrels of energy products.

Our pipeline systems in Canada span over 7,200 kilometres in length and transport

approximately 1.26 million barrels per day. In Europe we operate one of the largest

independent tank storage businesses, providing approximately 27 million barrels of

storage at 16 terminals in the United Kingdom, Ireland, Germany, Denmark and Sweden.

Our NGL extraction facilities have the capacity to process 6.2 billion cubic feet of

natural gas per day and we are one of the largest natural gas liquids extraction

businesses in North America.

We are a member of the S&P/TSX 60 Index and our common shares

trade on the Toronto Stock Exchange under the symbol IPL.


DELIVERINGSTABILITY2015 ANNUAL

R E P O R T



Telephone: (403) 290 6000

Fax: (403) 290 6092

Toll Free: 1 866 716 PIPE (7473)

Emergency (24hr): 1 800 727 7163


INTER

PIP

ELINE A

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UA

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