Stability Strength Solid Values

Commitment Experience 2002 Annual Report Annual 2002

Value Growth Solid Value

Solid Values. Solid Value. It is impossible for a company to create value in the marketplace without a sense of fundamental, deeply embedded values that form the bedrock for all our activities. Real values survive and are successful only if they create and preserve employee, public and investor trust as a result of accountability, responsibility and willingness to do the right thing without compromise. Trust is the foundation for all of our values and without trust, they mean nothing at all. That’s the bottom line for our workforce, customers and unitholders.

NBP Total Return vs. S&P 500 Annual Distributions Total Return Indexed to 100% Declared Cash Distributions Per Unit

NBP $2.34 $2.48 $2.70 $3.09 $3.20 $3.20* 175 S&P 500

160

145

130

115

100

85

70 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002 2003

*Indicative Solid Values. Solid Value. Northern Border Partners, L.P. 2002 Annual Report

To Our Unitholders

I’m proud to report to our unitholders that 2002 was another year of solid growth for Northern Border Partners, L.P. We performed well and successfully managed our way through some difficult issues brought on by a challenging business environment, a less than robust economy and a turbulent energy market. We ended the year on a high note with the announcement of yet another acquisition – the Viking Gas Transmission Company and a one-third interest in Guardian Pipeline.

This addition to our interstate pipeline system will be an excellent complement to our existing businesses and provide geographic, operating and administrative synergies with our Northern Border and Midwestern Gas Transmission pipelines. It is also a move that clearly demonstrates the kind of company we have become and how we intend to position ourselves as we move forward. We are a company with strong fundamentals and a strategically located base of core assets that generate stable, fee-based cash flows. The stable nature of our cash flows and our planned growth through targeted acquisitions are the hallmarks of Northern Border Partners.

2002 in Review

Net operating revenues were up from $461 million in 2001 to $496 million reported in 2002. Net income improved from $88 million in 2001 to $114 million in 2002. Cash flow from operating activities increased to $243 million for the year 2002 compared to $234 million the previous year. We increased total cash distributions to unitholders, improving from $3.09 per unit in 2001 to $3.20 per unit for 2002.

Historical Review

Distributions per unit increased 43 percent since 1997. Our distribution yield is currently at approximately 8.3 percent. Total return to a unitholder over the last five years was 66 percent. Since we began in 1993, our cash distribution to unitholders has grown as Northern Border Partners has grown into a large publicly-traded partnership with total capitalization of over $3 billion.

Strong Values

The culture of Northern Border Partners is shaped by our basic values as “pipeliners,” which is a term of mutual respect and trust within our ranks. As you read this annual report, I hope you’ll take a moment to reflect on some of our cornerstone values, which are woven into the text of this document just as tightly as they are woven into the fabric of our company. Without guiding values such as Commitment, Strength, Stability, Growth, Experience and Value, there would be no achievements to measure, challenges to meet or opportunities to capitalize upon.

1 Solid Values. Solid Value. Northern Border Partners, L.P. 2002 Annual Report

“The culture of Northern Border Partners is shaped by our basic values...”

I am most proud of our company’s continued safe and reliable operations in the year 2002. Safety is a valued discipline at Northern Border Partners that grows out of our core values of commitment, strength and experience.

Strategies for Success

In 2003, Northern Border Partners will celebrate the 10-year anniversary of our founding, although our management team has extensive industry experience and expertise that reflects much more than just one decade on the job. Our asset-based strategies continue to serve us well. Following are the strategies we will employ to keep our company on the growth track for the next ten years.

• Continue to focus on the operations and growth of the regulated pipelines to generate cash distributions for unitholders.

• Grow our gas gathering businesses by focusing on development in areas yielding the best return for capital deployed.

• Maintain a strong and balanced financial position to fund future growth and broaden our asset base with targeted acquisitions and expansions.

• Utilize solid operating fundamentals and preserve our outstanding record for safe, reliable pipeline operation.

If you’ve noticed that our strategies for the next ten years bear a striking resemblance to those of the past ten, let me assure you that you’re correct. And we’re doing everything in our power to keep it that way, knowing that we must focus on what we know best and continue to be responsive to the marketplace if we’re to continue to win the loyalty, trust and involvement of our customers and workforce.

My sincere thanks, once again, for your interest in Northern Border Partners.

William R. Cordes Chairman, Partnership Policy Committee Chief Executive Officer, Northern Border Partners, L.P. March 28, 2003

2 Northern Border Partners, L.P., a publicly-traded limited partnership since 1993, is a leading transporter of natural gas imported from Canada to the United States. By acquiring, owning and managing pipeline and midstream energy assets, the Partnership delivers a broad range of energy-related services to its customers across the United States and Canada.

Our interstate natural gas pipelines segment includes a 70 percent general partner interest in Northern Border Pipeline Company and ownership of Midwestern Gas Transmission Company. In January 2003, we expanded our natural gas pipeline holdings through our acquisition of Viking Gas Transmission and a one-third interest in Guardian Pipeline.

Our gas gathering and processing segment includes properties in both the United States and Canada. Crestone Energy Ventures encompasses our joint venture holdings in the Powder River and Wind River Basins in Wyoming. Through Bear Paw Energy, we have natural gas gathering in the Powder River Basin of Wyoming and gathering, processing and natural gas liquids fractionation operations in the Williston Basin in Montana and North Dakota. Border Midstream Services provides gathering and processing in the Western Canadian Sedimentary Basin in Alberta, Canada.

Black Mesa Pipeline, Inc., our wholly-owned subsidiary, comprises our coal slurry pipeline segment.

Our general partners are Northern Plains Natural Gas Company and Pan Border Gas Company, both subsidiaries of Enron Corp., and Northwest Border Pipeline Company, a subsidiary of TransCanada PipeLines Limited.

3 Experience

Many of the people in the Northern Border Partners organization have 20-plus years of experience in the pipeline business so it becomes a shared value and a badge of honor. The term “pipeliner” captures it best. It’s a label we put on ourselves and an experienced pipeliner values nothing more than reliability and safety.

“Peoples Energy Utilities and Northern Border Pipeline began their successful partnership in 1998 with the completion of Northern Border’s Chicago Project. The expansion of the Northern Border Pipeline into the Chicago marketplace provides Peoples Energy with operational synergies via services such as multiple city gate deliveries, high pressure storage injections and hub services, including balancing services, for electric peaking plants in the Chicago area.”

Peoples Energy Utilities Solid Values. Solid Value. Northern Border Partners, L.P. 2002 Annual Report

A LBERTA SASKATCHEWAN MANITOBA

ND MT Viking MN

WI SD Northern Border Guardian IA

IL IN

Midwestern KY

TN

Interstate Natural Gas Pipelines

Our interstate natural gas pipelines segment provides natural gas transmission services in the midwestern United States. Northern Border Pipeline, Midwestern Gas Transmission, Viking Gas A LBERTA Border Midstream Services Transmission andSAS KourATCH one-thirdEWAN interestMANITO BinA Guardian Pipeline, account for the 2,318 miles of interstate pipelines that make up this part of our business. Northern Plains Natural Gas Company – headquartered in Omaha, Nebraska – is responsible for the operations of Northern Border Pipeline, ND MT Bear Paw Midwestern Gas Transmission and Viking Gas Transmission.

The interstateCrestone gas pipelines continue to provide us with stable earnings and cash flow, and high

utilization dueWY to continued customer demand. We completed our acquisition of Viking Gas Transmission in January, 2003. Viking Gas Transmission and Guardian Pipeline complement our pipeline system – Viking, by adding a total of 578 miles of pipeline and our interest in Guardian,

by adding 141 miles of pipeline – both of which expand our access to major market areas in Minnesota, Wisconsin and North Dakota.

UT Incremental growth and demand for natural gas in the markets we serve remains favorable,CO despite unpredictable economic conditions. In 2003, we will continue to focus on the safe operation and further development of the interstate natural gas pipelines segment through expansions, alliances or Black Mesa selective acquisitions, in addition to a focus on initiating new servicesAZ to meet customer demand.

5 Solid Values. Solid Value. Northern Border Partners, L.P. 2002 Annual Report

Northern Border Pipeline Physical Facilities Pipeline Route Distance (miles) Facility/Capacity (MMcf/d)* *Million Cubic Feet Per Day

Canadian border to Ventura, Iowa 822 42” pipe/2,374

Ventura, Iowa to Harper, Iowa 147 30” pipe/1,484 36” pipe

Harper, Iowa to Manhattan, Illinois 245 36” pipe/844 (Chicago area) 30” pipe Manhattan, Illinois to North Hayden, Indiana 35 30” pipe/545 (Terminus)

Along the pipeline route there are 16 compressor stations with total rated horsepower of 499,000 and measurement facilities to support the receipt and delivery of gas at various points. Other facilities include four field offices and a microwave communication system with 51 tower sites.

Northern Border Pipeline Company

Northern Border Pipeline Company is owned 70 percent by us with the remaining 30 percent owned by TC PipeLines, LP, another publicly-traded partnership. The largest proportion of our assets, earnings and cash flow is generated from our ownership interest in Northern Border Pipeline.

Northern Border Pipeline Company owns a 1,249-mile interstate pipeline system that serves as a major transportation link joining the vast natural gas reserves in the Western Canadian Sedimentary Basin and the Williston Basin with growing markets in the midwestern United States. The system connects directly and through multiple pipelines to reach various natural gas markets across the country.

During 2002, Northern Border Pipeline transported nearly 20 percent of all natural gas imported from Canada to the United States. Of the natural gas transported on the system, approximately 89 percent of the total volume was produced in Canada, five percent in the Dakota Gasification plant located near Beulah, North Dakota and six percent in the Williston Basin.

Several market centers, where natural gas transported by the pipeline system is sold, traded and received for transport to significant consuming markets in the Midwest and to interconnecting pipeline facilities destined for other markets, have developed around Northern Border Pipeline. The largest of these market centers is at Northern Border Pipeline’s Ventura, Iowa interconnection with Northern Natural Gas Company. The other two market center locations are the Harper, Iowa connection with Natural Gas Pipeline Company of America and the multiple interconnects in the Chicago area that include connections with Northern Illinois Gas Company, The Peoples Gas Light and Coke Company and Northern Indiana Public Service Company who serve parts of Illinois and Indiana and beyond.

6 “The combination of Midwestern Gas Transmission and Northern Border Pipeline has brought a new level of teamwork and professionalism to our interactions with Midwestern’s customers. We are continually working to reinforce positive relationships with the customers by providing flexible new transportation deals, including bi-directional transportation options between the two pipes and increased system reliability.”

Midwestern Gas Transmission

Growth is a result of financial performance – and in our case, the reverse is also true. Growth is essential for Northern Border Partners and also becomes a personal opportunity for our employees as they grow the business and their own stake in it.

Growth Commitment

Whether it’s a late night call-out or an early morning deadline, our people are always working hard, doing their jobs accurately and professionally. That’s commitment. We have some very dedicated people who regularly go above and beyond the call to make good things happen for our unitholders and customers.

“We could share several examples of our first-hand experience with Northern Border’s commitment to deliver value and provide exceptional customer service. The most recent example occurred during this past February. During the coldest part of the winter, when the industry was scrambling to keep gas supplies flowing to the market, four NBPL personnel were on the phone with us until midnight, working with us to resolve a system error that was affecting nominations. The situation was resolved without interrupting a single customer.”

Tenaska Marketing Ventures Solid Values. Solid Value. Northern Border Partners, L.P. 2002 Annual Report

Midwestern Gas Transmission System

The Midwestern Gas Transmission pipeline system extends from an interconnection with Tennessee Gas Transmission near Portland, Tennessee to a point of interconnection with several interstate pipeline systems near Joliet, Illinois. Midwestern connects to a variety of major interstate pipeline systems providing bi-directional service to markets in Kentucky, Indiana, southern Illinois, as well as the growing Joliet/Chicago market hub.

The Midwestern system adds 350 miles of interstate natural gas transmission line and gives Canadian producers an entrance into markets in the southeastern United States. The pipeline consists of 350 miles of pipe with a capacity of 650 MMcf/d for volumes transported from Portland, Tennessee to the north. There are seven compressor stations in operation with total rated horsepower of 69,070.

Midwestern’s strategic location, variety of pipeline interconnects and bi-directional service – designed to move gas either north or south – provide our customers with increased opportunities to supply natural gas to markets in the midwestern and south-central United States. These factors give our customers an expanded marketplace as well as additional delivery and service outlets.

Viking Gas Transmission System

In January of 2003, Northern Border Partners completed its acquisition of Viking Gas Transmission Company and a one-third interest in Guardian Pipeline.

The Viking Gas Transmission system consists of a 578-mile pipeline system with a design capacity of approximately 500 MMcf/d at the origin near Emerson, Manitoba and 300 MMcf/d at the terminus near Marshfield, Wisconsin. There are eight compressor stations with a total rated horsepower of 68,650. Viking connects to other major pipeline systems, allowing it to deliver gas from the Western Canadian Sedimentary Basin to markets in North Dakota, Minnesota and Wisconsin.

9 Solid Values. Solid Value. Northern Border Partners, L.P. 2002 Annual Report A LBERTA SASKATCHEWAN MANITOBA

ND MT Viking MN

WI SD Northern Border Guardian IA Guardian Pipeline, LLC IL IN

On December 7, 2002, Guardian Pipeline went into service with facilities including 141 miles Midwestern of pipeline with a capacity of 750 MMcf/d, approximately 80 percent of which is committed to KY firm contracts. Guardian transports natural gas from Joliet, Illinois to a point west of Milwaukee, TN Wisconsin. CMS Energy Corporation and Wisconsin Energy Corporation hold the remaining interests in this system. Guardian is operated by a third party.

A LBERTA Border Midstream Services SASKATCHEWAN MANITOBA

ND MT Bear Paw

Crestone

WY Natural Gas Gathering and Processing

The natural gas gathering and processing segment of our business provides services for the gathering, treating, processing and compression of natural gas and the fractionation of natural gas UT liquids. We do not explore for or produce crude oil or natural gas nor do we own crude oil or natural CO gas reserves.

Crestone Energy Ventures, Bear Paw Energy and Border Midstream Services comprise this business Black Mesa AZ segment. NBP Services Corporation provides administrative and operational support for Bear Paw Energy and Crestone Energy Ventures through employees based in Denver, Colorado and field locations in Wyoming, Montana and North Dakota. The operation of the facilities of Border Midstream Services is performed by a third party.

Our strong relationships with producers allow us to offer integrated services through all our facilities. Our service offerings, delivery choices, wide coverage and operational efficiencies help to differentiate us in the industry.

10 “Northern Border Pipeline is a key component of the web of assets managed by BP to deliver gas supplies into the Midwest and Chicago market areas. In the competitive pipeline world of shipping Western Canadian Sedimentary Basin gas supplies to market, Northern Border’s strength lies in its ability to access multiple market areas via direct connects with LDC’s and many interstate pipelines. The strength and flexibility of Border’s operations increase its value to BP as a shipper.”

BP Amoco

Value means providing those services that are desirable, useful and important to our customers at a fair price. It is the approach taken with all our commercial activities because when we offer real value, the desired financial performance and investment returns will follow. Value is customer driven.

Value Strength

Strength in our business means a strong balance sheet. We’re a $3 billion partnership and we’re able to bring that strength into play as needed when making acquisitions that fit our strategy for growth that will be important to us in the future.

“Bear Paw has been a valuable partner to Anadarko’s growth in the Powder River Basin. Their commitment to customer service and their understanding of our objectives has made for a successful effort overall. We value the relationship with Bear Paw and look forward to continued success.”

Anadarko Petroleum Corporation Solid Values. Solid Value. Northern Border Partners, L.P. 2002 Annual Report

We continue working to improve operational profitability by increasing natural gas throughput by way of new connections, expansions, acquisitions and operational efficiencies while prudently deploying capital.

Crestone Energy Ventures

Crestone Energy Ventures, our wholly-owned subsidiary, holds our joint venture ownership interests in the Powder River and Wind River Basins in Wyoming. Bighorn Gas Gathering, Fort Union Gas Gathering and Lost Creek Gathering are the joint ventures, which collectively make up over 300 miles of gas gathering facilities in the basins and support our strategic platform for growth and diversification.

Bighorn and Fort Union collect coal bed methane gas that is produced in the Powder River Basin in northeastern Wyoming. Under long-term contracts with producers, Bighorn serves a vast production area with approximately 800,000 acres dedicated to its gathering system. The Bighorn system has the ability to gather more than 250 MMcf/d of gas for delivery to the Fort Union gathering system. Fort Union has the capability of delivering more than 634 MMcf/d of gas into the interstate pipeline grid at Glenrock, Wyoming.

The Lost Creek system gathers natural gas produced from traditional gas wells in the Wind River Basin in central Wyoming. The system’s 120 miles of gathering pipeline has the capability of delivering more than 275 MMcf/d of gas into the interstate pipeline grid.

Bear Paw Energy

Bear Paw Energy, purchased in 2001, has extensive natural gas gathering, processing and fractionation operations in the Williston Basin in Montana and North Dakota. Bear Paw Energy’s Powder River Basin operations have nearly 1,100 miles of high and low pressure gathering pipelines and close to 430,000 acres of dedicated reserves. These facilities interconnect with the Bighorn and Fort Union systems as well as other pipeline systems and together join the interstate gas pipeline grid to serve important markets in the Rocky Mountains, the Midwest and California.

In the Williston Basin, Bear Paw Energy has approximately 3,000 miles of gathering pipelines and five processing plants with 90 MMcf/d of capacity and two fractionation plants.

13 A LBERTA SASKATCHEWAN MANITOBA

ND MT Viking MN

WI Solid Values. Solid Value. SD Northern Border Partners, L.P. 2002 AnnualNorthern Report Border Guardian IA

IL IN

Midwestern KY

TN

Border Midstream Services

Through our subsidiary, Border Midstream Services, Ltd., we own the Mazeppa and Gladys gas processing plants and a minority interest in the Gregg Lake/Obed Pipeline in Alberta, Canada. A LBERTA Border Midstream Services SASKATCHEWAN Major customersMANITOBA of Border Midstream – ConocoPhillips, Compton and ExxonMobil – account for nearly 90 percent of Mazeppa’s revenues.

ND MT Bear Paw The Mazeppa Plant is a sour gas processing facility with 80 MMcf/d of capacity and 115 miles of associated gathering pipelines. Sour gas processing involves the removal of high quantities of

Crestone sulphur from the gas stream. The Gladys Plant is also a sour gas processing plant with 10 MMcf/d

WY of capacity and the Gregg Lake/Obed Pipeline is comprised of 85 miles of gathering lines with a capacity of 150 MMcf/d.

UT CO

Black Mesa AZ

Coal Slurry Pipeline

Black Mesa Pipeline

Black Mesa Pipeline, the only coal slurry pipeline in operation in the United States, operates a 273-mile, 18-inch diameter pipeline, which originates at a coal mine in Kayenta, Arizona and moves westward through northern Arizona to the Mohave Power Station in Laughlin, Nevada. The pipeline, transporting crushed coal suspended in water, is the sole source of fuel for the Mohave Power Station, which consumes an average of 4.8 million tons of coal each year. The pipeline capacity is solely contracted to the Mohave Power Station through 2005.

In 2002, Black Mesa continued its pattern of cost effective transportation of coal to the Mohave Generating Station. We anticipate steady contribution to earnings and cash flows in 2003.

14 “The Mohave Power Station has relied upon the dedication of the Black Mesa operations team for more than thirty years. We count on Black Mesa for the reliable transportation of our generating fuel.”

Southern California Edison Company

To us, stability and reliability of cash flow are at the center of our business. Also, being in the energy business means providing reliable deliveries to our customers. When energy is needed, our customers expect it to be there right now. We make sure that it is.

Stability Border Midstream A LBERTA Services SA SKATCHEWAN MANITOBA

Williston Basin Bear Paw

ND MT Bear Paw Viking MN

Powder River Basin WI

Wind River SD Basin Crestone Northern Border Guardian

Greater Green WY IA River Basin NE IL IN UT CO Midwestern KY

TN

Black Mesa AZ

The Northern Border Partners pipeline network represents the vital link in the delivery of energy to markets in the United States and Canada. The safe operation and further development of the pipeline systems contribute to our overall corporate strategy for growth and stability.

Business Overview Stock Exchange and Asset Mix Unit Trading Prices

The Partnership’s limited partnership (LP) units trade on the New York Stock Exchange under the 70% symbol NBP. Outstanding units at December 31, 2002 Interstate Natural Gas totaled 43,809,714. Pipelines (Regulated) 2002 HIGH LOW Fourth Quarter $ 38.00 $ 33.46 Third Quarter $ 37.50 $ 29.30 Second Quarter $ 41.90 $ 35.43 First Quarter $ 42.50 $ 34.25 29% Natural Gas 2001 HIGH LOW Gathering & Processing Fourth Quarter $ 41.05 $ 33.60 (Nonregulated) Third Quarter $ 39.99 $ 32.50 1% Coal Slurry Second Quarter $ 41.20 $ 35.20 First Quarter $ 37.60 $ 30.25

16 Cash Distributions Transfer Agent, Registrar and Cash Distribution Paying Agent Since its formation as a publicly-traded partnership in 1993, Northern Border Partners, L.P. has made Registered unitholders should direct communication cash distributions to unitholders each quarter. Cash regarding name and address changes, distribution distributions of $0.80 were paid on February 14, checks, lost certificates and other administrative 2003. For a summary of the cash distributions paid, matters to: see page 13. EquiServe Trust, N.A. P.O. Box 43069 Publicly-Traded Partnership Attributes Providence, Rhode Island 02940-3069 (781) 575-2726 Northern Border Partners, L.P. is a publicly-traded (800) 519-3111 partnership, which operates in the following distinct www.equiserv.com ways from a publicly-traded stock corporation: Additional Investor Information Unitholders own limited partnership units instead of Additional information about Northern Border shares of stock and receive cash distributions rather Partners, L.P. including the Annual Report, Form than dividends. 10-K and/or Form 10-Q, may be obtained at no A partnership generally is not a taxable entity and charge, by contacting Investor Relations toll-free does not pay federal income taxes. All of the income, at (877) 208-7318 or writing to the Company’s gains, losses, deductions or credits flow through the mailing address or accessing the Company’s website partnership to the unitholders on a per unit basis. at www.northernborderpartners.com. Exhibits to the The unitholders are required to report their allocated Form 10-K will be mailed upon similar request and share of these amounts on their income tax returns payment of specified fees. whether or not cash distributions are made by the partnership to its unitholders. K-1 Inquiries & Corrections

Cash distributions paid by the Partnership to a Unitholder Schedule K-1 inquiries should be directed unitholder are generally not taxable, unless the to: (800) 371-2188 or to the Partnership’s website: amount of any cash distributed is in excess of www.northernborderpartners.com. If the information the unitholder’s adjusted basis in his partnership on the Schedule K-1 does not agree with the interest. Therefore, unlike a corporate stockholder, unitholder’s records, please call the toll-free number. the unitholder will not receive a Form 1099 for the cash he receives. Internet Website Earnings and other financial results, Partnership NBP provides each unitholder a Schedule K-1 tax news, filings with the Securities and Exchange package in March of each year that includes that Commission and other Partnership information are particular unitholder’s allocated share of reportable available on Northern Border Partners’ website: Partnership items and other Partnership information www.northernborderpartners.com. necessary to file federal and/or state tax returns. Any unitholder not receiving such Schedule K-1 should 2002 Annual Report call (800) 371-2188. This Annual Report and the statements contained Partnership Offices herein are submitted for the general information of Northern Border Partners, L.P. the unitholders of Northern Border Partners, L.P. 13710 FNB Parkway and are not intended for use in connection with or Omaha, Nebraska 68154-5200 to induce the sale or purchase of securities. (402) 492-7300 Denver + This report may contain certain forward-looking information regarding the Partnership, including projections, estimates, forecasts, plans and objectives. Although management believes that all such statements are based upon reasonable assumptions, no assurance can be given that the actual results will not differ materially from those contained in such forward-looking statements. Please refer to Partnership’s most recent SEC filings for information that may affect results. Design by Design Webster Associates, Inc. Omaha 13710 FNB Parkway Omaha, Nebraska 68154-5200

P.O. Box 542500 Omaha, Nebraska 68154-8500

Phone: 402-492-7300

www.northernborderpartners.com