TransCanada Delivers Solid Third Quarter Financial Performance; Board Declares Quarterly Dividend of $0.27 Per Share.Energy Editors/Business Editors CALGARY Calgary (kăl`gərē), city (1991 pop. 710,677), S Alta., Canada, at the confluence of the Bow and Elbow rivers. The largest city in Alberta and the fastest-growing major city in Canada, Calgary is a corporate, transportation, and financial , Alberta--(BUSINESS WIRE)--Oct. 28, 2003 Third Quarter and Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. 2003 Financial Highlights (All financial figures are in Canadian dollars Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents unless noted otherwise) -- TransCanada The term TransCanada can refer to several things:
$248 million or $0.51 per share. This includes net income from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. which reflects the income recognition of $50 million or $0.10 per share of the initially deferred gain of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $100 million after tax relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the 2001 disposition Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of of the company's Gas Marketing business. -- Net income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the third quarter 2003 was $198 million or $0.41 per share, an increase of $23 million or $0.04 per share compared to $175 million or $0.37 per share for the third quarter 2002. All segments of the company contributed to the 13 per cent increase. -- TransCanada's net income for the nine months ended September September: see month. 30, 2003 was $658 million or $1.36 per share, after reflecting the net income from discontinued operations of $50 million or $0.10 per share. Net income for the same period last year was $567 million or $1.19 per share. -- Net income from continuing operations for the nine months ended September 30, 2003 was $608 million or $1.26 per share, an increase of $41 million, or $0.07 per share, over net earnings of $567 million or $1.19 per share in the first nine months of 2002. -- Funds generated from continuing operations for the third quarter 2003 were $516 million, an increase of more than 10 per cent compared to the third quarter 2002. -- Year-to-date, funds generated from continuing operations were $1,407 million, compared to $1,360 million for the first nine months of 2002. -- TransCanada's Board of Directors today declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. a quarterly dividend of $0.27 per share for the quarter ending December December: see month. 31, 2003 on the outstanding common shares. This is the 160th consecutive quarterly dividend on the common shares paid by TransCanada and its subsidiary. It is payable on January January: see month. 30, 2004 to shareholders of record at the close of business on December 31, 2003. "In the third quarter, we continued to make progress on our key strategies, including growing our core businesses, driving for operational excellence, and maintaining and utilizing our financial strength," said Hal Kvisle, TransCanada's chief executive officer. "Our strong cash flow, earnings and balance sheet position us well to continue to enhance shareholder value." Third Quarter 2003 Developments Natural Gas Transmission Foothills Acquisition Completed In August, TransCanada completed its purchase of the remaining interests of Foothills Pipe Lines Ltd. (Foothills) and its subsidiaries from Duke Energy Gas Transmission (Duke) for $259 million, including assumption of $154 million of Duke's proportionate pro·por·tion·ate adj. Being in due proportion; proportional. tr.v. pro·por·tion·at·ed, pro·por·tion·at·ing, pro·por·tion·ates To make proportionate. share of Foothills' corporate debt. As a result, TransCanada now owns 100 per cent of Foothills and its subsidiaries. Increased Ownership Interest in Portland Portland, town, England Portland, town (1991 pop. 12,945), Dorset, S England. It is on the Isle of Portland, a small rocky peninsula. Portland stone has been used in St. Paul's Cathedral and other important London buildings. Lobsters and crabs are harvested. Natural Gas In September, TransCanada increased its ownership interest in Portland Natural Gas Transmission System (PNGTS PNGTS Portland Natural Gas Transmission System (Maine) ) by more than 10 per cent to 43.42 per cent. TransCanada acquired a portion of DTE (Data Terminating Equipment) A communications device that is the source or destination of signals on a network. It is typically a terminal or computer. Contrast with DCE.  DTE - Data Terminal Equipment East Coast Pipeline Company's interest in PNGTS for approximately US$47.1 million, including assumed debt of approximately US$27.8 million. The transaction closed on September 29, 2003. In October October: see month. , TransCanada announced an agreement to acquire El Paso El Paso (ĕl pă`sō), city (1990 pop. 515,342), seat of El Paso co., extreme W Tex., on the Rio Grande opposite Juárez, Mex.; inc. 1873. Corporation's (El Paso) 29.64 per cent interest in PNGTS for approximately US$137.2 million, including assumed debt of approximately US$80.7 million. The closing of the transaction is expected to be completed by the end of this year and is subject to the satisfaction of various closing conditions including the right of first offer provisions. Under the terms of the PNGTS partnership agreement, the other PNGTS partner, Gaz Metropolitain and Company, Limited Partnership (Gaz Metropolitain), has the right to acquire its pro rata [Latin, Proportionately.] A phrase that describes a division made according to a certain rate, percentage, or share. In a Bankruptcy case, when the debtor is insolvent, creditors generally agree to accept a pro rata share of what is owed to them. share of El Paso's offered interest. This right is exercisable for a period of thirty days after receipt of formal notice from El Paso. Should this right of first offer not be exercised, TransCanada's interest in Portland will increase to 73.06 per cent from 43.42 per cent. Should Gaz Metropolitain's right of first offer be exercised, TransCanada's total interest will increase to 61.71 per cent. The purchase price paid by TransCanada would be reduced proportionately pro·por·tion·ate adj. Being in due proportion; proportional. tr.v. pro·por·tion·at·ed, pro·por·tion·at·ing, pro·por·tion·ates To make proportionate. . PNGTS operates a 471 kilometre, 220 million cubic feet per day interstate in·ter·state adj. Involving, existing between, or connecting two or more states. n. One of a system of highways extending between the major cities of the 48 contiguous United States. Noun 1. natural gas pipeline which connects with the Trans Quebec Quebec, city, Canada Quebec, Fr. Québec, city (1991 pop. 167,517), provincial capital, S Que., Canada, at the confluence of the St. Lawrence and St. Charles rivers. & Maritimes Pipeline (50 per cent owned by TransCanada) near Pittsburg, New Hampshire For other places with the same name, see Pittsburg. Pittsburg is a town in Coos County, New Hampshire, United States. The population was 867 at the 2000 census. It is the northernmost town in New Hampshire. U.S. Route 3 is the only major highway in the town. . Fairwinds LNG LNG (liquefied natural gas): see under natural gas. Project In September, TransCanada, along with ConocoPhillips ConocoPhillips (NYSE: COP) is an international energy corporation with its headquarters located in Houston, Texas. It was created through the merger of Conoco Inc. and the Phillips Petroleum Company on August 30, 2002. Company, presented plans to evaluate a site in the northeast “Northeastern” redirects here. For the Boston college, see Northeastern University, Boston. Northeast or north east is the ordinal direction halfway between north and east. It is the opposite of southwest. See boxing the compass. U.S. for the development of a liquefied natural gas liquefied natural gas: see under natural gas. Liquefied natural gas (LNG) A product of natural gas which consists primarily of methane. Its properties are those of liquid methane, slightly modified by minor constituents. (LNG) regasification facility. The companies' "Fairwinds" partnership has asked the residents of the Town of Harpswell, located approximately 15 miles northeast of Portland, Maine Portland is the largest city in the U.S. state of Maine, with a 2004 population of 63,882. Portland is Maine's cultural, social and economic capital. Tourists are drawn to Portland's historic Old Port district along Portland Harbor, which is at the mouth of the Fore River and part to vote on leasing a site owned by the Town for an LNG facility. The vote is scheduled for January 20, 2004. "Gas demand in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. is expected to exceed traditional supply by the end of the decade and alternative supplies, including Northern gas and LNG imports are going to be needed by the market," said Mr. Kvisle. "We expect to play a role in fulfilling that need. We have the financial means to participate, we know the North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. natural gas market and we have the pipeline assets, experience and capacity necessary to move the LNG, once regasified, to market." If leasing of the site is approved by the residents of Harpswell and the necessary regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. approvals are subsequently received, construction of the LNG facility could begin in 2006 with the facility becoming operational in 2009. Natural gas from the LNG facility would be delivered through a new pipeline that would connect with an existing pipeline in Maine Maine, ship Maine, U.S. battleship destroyed (Feb. 15, 1898) in Havana harbor by an explosion that killed 260 men. The incident helped precipitate the Spanish-American War (Apr., 1898). Commanded by Capt. Charles Sigsbee, the ship had been sent (Jan. . Power Generation On October 24, 2003, TransCanada and Grandview Grandview, city (1990 pop. 24,967), Jackson co., W Mo., S of Kansas City; inc. 1912. Hardware, chemicals, transportation equipment, apparel, steel, processed foods, and machinery are manufactured in the city. Cogeneration cogeneration In power systems, use of steam for both power generation and heating. High-temperature, high-pressure steam from a boiler and superheater first passes through a turbine to produce power. Corporation, an affiliate Affiliate Relationship between two companies when one company owns substantial interest, but less than a majority of the voting stock of another company, or when two companies are both subsidiaries of a third company. See: Subsidiaries, parent company. of Irving Oil Irving Oil is a privately owned gasoline, oil, and natural gas producing and exporting company. It is also one of the only energy companies in Canada which supports implementation of the Kyoto Accord. Its headquarters are in Saint John, New Brunswick. Limited (Irving Irving, city (1990 pop. 155,037), Dallas co., N Tex., a suburb of Dallas; inc. as a city 1952. Building supplies, chemicals, electronic equipment, and airplane parts are manufactured in Irving. ), announced an agreement to build a 90 megawatt meg·a·watt n. Abbr. MW One million watts. meg  a·watt natural gas-fired gas-fired adj → de gasgas-fired adj → au gaz gas-fired adj (heater etc) → Gas- cogeneration power plant on the site of the Irving Oil Refinery in Saint John, New Brunswick Saint John[3] is the largest city in the province of New Brunswick and the oldest incorporated city in Canada. In 2006 the city proper had a population of 68,043. The population of the Census Metropolitan Area is 122,389. at an estimated capital cost of approximately $85 million. The Grandview cogeneration facility will be developed and owned by TransCanada. Under a 20-year tolling arrangement, Irving will provide fuel for the plant and contract for 100 per cent of the plant's heat and electricity output. Pending regulatory approvals, construction of the plant is expected to begin in November November: see month. 2003, with an anticipated in-service in-service In-service training adjective Referring to any form of on-the-job training noun In-service training of an employee date by the end of 2004. Regulatory Developments NEB 2003 Mainline mainline Drug slang verb To inject a drug Tolls Decision In July July: see month. , TransCanada received the National Energy Board's (NEB's) decision on TransCanada PipeLines The TransCanada pipeline is a system of natural gas pipelines, up to 48 inches (1219 millimetres) in diameter, that carries gas through Alberta, Saskatchewan, Manitoba, Ontario and Quebec. It is maintained by TransCanada PipeLines, LP. It is the longest pipeline in Canada. Limited's 2003 Mainline Tolls application. In its decision, the NEB approved key components of the application including: an increase in the bid floor price for Interruptible Transportation Service; an increase in the composite composite, alternate common name for Asteraceae or Compositae, the aster family. composite - aggregate depreciation rate from 2.89 per cent to 3.42 per cent; continuation continuation - continuation passing style of the Fuel Gas Incentive Program; and the introduction of a new tolling zone in southwestern Ontario Southwestern Ontario is a region of the Canadian province of Ontario, centred on the city of London. It extends north to south from the Bruce Peninsula on Lake Huron to the Lake Erie shoreline, and east to south-west roughly from Kitchener to Windsor. . "We are encouraged by the NEB's recognition of our need to manage the long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. risks of the Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. Mainline," said Mr. Kvisle. "This decision is an essential step towards ensuring the long-term sustainability of the Mainline, to the benefit of all stakeholders Stakeholders All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government. ." The rates included in this decision are considered interim pending the disposition of TransCanada's appeal to the Federal Court of Appeal regarding the NEB's Review and Variance The discrepancy between what a party to a lawsuit alleges will be proved in pleadings and what the party actually proves at trial. In Zoning law, an official permit to use property in a manner that departs from the way in which other property in the same locality (RH-R-1-2002) decision. EUB EUB Energy and Utilities Board (Alberta, Canada) EUB EU–Büro (Bundesministerium für Bildung und Forschung; German ministry of Science) EUB Electric Upright Bass EUB European Union Bank EUB Essential User Bypass Alberta Alberta (ălbûr`tə), province (2001 pop. 2,974,807), 255,285 sq mi (661,188 sq km), including 6,485 sq mi (16,796 sq km) of water surface, W Canada. System 2004 General Rate Application and Generic Generic Describes the characteristics and/or experience of the total universe of a coupon of MBS sector type; that is, in contrast to a specific pool or collateral group, as in a specific CMO issue. Cost of Capital Proceeding In July, TransCanada, along with other utilities, filed evidence in the Alberta Energy and Utilities Board's (EUB's) Generic Cost of Capital Proceeding. In its application for the Alberta System, TransCanada has requested a return on common equity of 11 per cent with a deemed common equity component of 40 per cent. The EUB's hearing is set to begin in November 2003. The EUB expects to adopt a standardized approach According to International Convergence of Capital Measurement and Capital Standards, known as Basel II, the standardized approach is a set of risk measurement techniques for banking institutions. The term may be used in the context of credit risk or operational risk. to determining the rate of return and capital structure for all utilities under its jurisdiction. On September 30, 2003, TransCanada filed Phase One of the Alberta System's 2004 General Rate Application (GRA GRA Graphic Arts GRA Grande Raccordo Anulare (circular highway surrounding Rome, Italy) GRA Graduate Research Assistant GRA Georgia Research Alliance GRA Graduate Research Assistantship GRA Guyana Revenue Authority ) with the EUB. With this application, TransCanada is seeking approval of the Alberta System's rate base and revenue requirement for 2004. The EUB hearing of the 2004 GRA is set to commence March 16, 2004. Power Blackout A complete loss of power. See brownout. The power blackout across Ontario Ontario, city, United States Ontario, city (1990 pop. 133,179), San Bernardino co., S Calif., near Los Angeles, in a region of vineyards; inc. 1891. and the northeastern north·east n. 1. Abbr. NE The direction or point on the mariner's compass halfway between due north and due east, or 45° east of due north. 2. An area or region lying in the northeast. 3. United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. on August 14, 2003 created unplanned outages for some of TransCanada's power plants. Most facilities were brought back on-line within hours. Natural gas continued to flow through TransCanada's pipeline system with some compressor compressor, machine that decreases the volume of air or other gas by the application of pressure. Compressor types range from the simple hand pump and the piston-equipped compressor used to inflate tires to machines that use a rotating, bladed element to achieve stations operating on auxiliary auxiliary In grammar, a verb that is subordinate to the main lexical verb in a clause. Auxiliaries can convey distinctions of tense, aspect, mood, person, and number. power. The blackout did not have a material impact on the company's net earnings. "The employees of our Ontario and northeastern U.S. power plants and gas facilities worked very hard under extraordinary circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or to cope with the blackout and to work cooperatively co·op·er·a·tive adj. 1. Done in cooperation with others: a cooperative effort. 2. Marked by willingness to cooperate; compliant: a cooperative patient. with regulators to get the power back on for many people," said Mr. Kvisle. "Thanks to their efforts, our pipeline and power facilities performed exceptionally well during the power outage Noun 1. power outage - equipment failure resulting when the supply of power fails; "the ice storm caused a power outage" power failure equipment failure, breakdown - a cessation of normal operation; "there was a power breakdown" ." Teleconference - 1:00 p.m. (Mountain)/ 3:00 p.m. (Eastern) TransCanada will hold a teleconference today at 1:00 p.m. (Mountain) / 3:00 p.m. (Eastern) to discuss the third quarter 2003 financial results and general developments and issues concerning the company. Analysts, members of the media and other interested parties wanting to participate in the call should dial 1-800-273-9672 or 416-695-5806 (Toronto Toronto (tərŏn`tō), city (1998 est pop. 2,400,000), provincial capital, S Ont., Canada, on Lake Ontario. Toronto is the largest city in Canada and since the 1970s has been one of the fastest-changing cities in North America, experiencing area) at least 10 minutes prior to the start of the call. No pass code is required. A replay of the teleconference will be available two hours after the conclusion of the call until midnight, November 4, 2003, by dialing 1-800-408-3053 or 416-695-5800 (Toronto area) and entering passcode 1487808. The conference will begin with a short address by members of TransCanada's executive management, followed by a question and answer period for investment analysts. A question and answer period for members of the media will immediately follow. A live audio Web cast of the teleconference will also be available on TransCanada's Web site. The teleconference Web cast will be archived and available for replay. About TransCanada TransCanada is a leading North American energy company. We are focused on natural gas transmission and power services with employees who are expert in these businesses. Our network of approximately 38,000 kilometres of pipeline transports the majority of Western Canada's natural gas production to the fastest growing markets in Canada and the United States The United States and Canada share a unique legal relationship. U.S. law looks northward with a mixture of optimism and cooperation, viewing Canada as an integral part of U.S. economic and environmental policy. . TransCanada owns, controls or is constructing nearly 4,700 megawatts of power - an equal amount of power can meet the needs of about 4.7 million average households. Our common shares trade under the symbol TRP Trp tryptophan. TRP traumatic reticuloperitonitis. Trp tryptophan. on the Toronto and New York stock exchanges New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. . Visit us on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at www.transcanada.com for more information.
Third Quarter 2003 Financial Highlights
(unaudited)
Three months Nine months
ended ended
Operating Results September 30 September 30
(millions of dollars) 2003 2002 2003 2002
------------------------------------------------ ----- ----- -----
Revenues 1,391 1,285 4,038 3,876
Net Income
Continuing operations 198 175 608 567
Discontinued operations 50 - 50 -
----- ----- ----- -----
248 175 658 567
----- ----- ----- -----
----- ----- ----- -----
Cash Flow
Funds generated from continuing operations 516 467 1,407 1,360
Capital expenditures 81 182 264 397
Acquisitions, net of cash acquired 135 19 547 19
Three months Nine months
ended ended
September 30 September 30
Common Share Statistics 2003 2002 2003 2002
------------------------------------------------ ----- ----- -----
Net Income Per Share - Basic
Continuing operations $0.41 $0.37 $1.26 $1.19
Discontinued operations 0.10 - 0.10 -
----- ----- ----- -----
$0.51 $0.37 $1.36 $1.19
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----- ----- ----- -----
Dividend Per Share $0.27 $0.25 $0.81 $0.75
Common Shares Outstanding (millions)
Average for the period 482.1 478.9 481.1 478.0
End of period 482.4 479.1 482.4 479.1
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TRANSCANADA CORPORATION THIRD QUARTER 2003 Quarterly Report to Shareholders
Consolidated Results-at-a-Glance Three months Nine months
(unaudited) ended ended
(millions of dollars except September 30 September 30
per share amounts) 2003 2002 2003 2002
------------------------------------------------ ----- ----- -----
Net Income
Continuing operations 198 175 608 567
Discontinued operations 50 - 50 -
----- ----- ----- -----
248 175 658 567
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Net Income Per Share - Basic
Continuing operations $0.41 $0.37 $1.26 $1.19
Discontinued operations 0.10 - 0.10 -
----- ----- ----- -----
$0.51 $0.37 $1.36 $1.19
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Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial The following discussion and analysis should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. unaudited consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge of TransCanada Corporation (TransCanada or the company) for the nine months ended September 30, 2003 and the notes thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. . Results of Operations Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: TransCanada's net income for third quarter 2003 was $248 million or $0.51 per share. This includes net income from discontinued operations which reflects the income recognition of $50 million or $0.10 per share of the initially deferred gain of approximately $100 million after tax relating to the 2001 disposition of the company's Gas Marketing business. Net income from continuing operations (net earnings) for third quarter 2003 of $198 million or $0.41 per share, increased by $23 million or $0.04 per share, compared to $175 million or $0.37 per share for third quarter 2002. All segments of the company contributed to the increase. Higher net earnings from the Power business included $26 million after tax from TransCanada's investment in Bruce Power Bruce Power Limited Partnership is a Canadian corporation. It exists as a partnership between Cameco Corporation (31.6%), TransCanada Corporation (31.6%), BPC Generation Infrastructure Trust (31.6%), the Power Workers Union (4%) and The Society of Energy Professionals (1. L.P. (Bruce Power), partially offset by lower operating and other income from Power's Western Operations. Higher net earnings in the Transmission business were mainly due to TransCanada's $11 million share of future income tax benefits recognized by TransGas Transgas is the largest natural gas distributing company in the Czech Republic and it is owned by the german company RWE. External links
TransCanada's net income for the nine months ended September 30, 2003 was $658 million or $1.36 per share after reflecting net income from discontinued operations of $50 million or $0.10 per share compared to $567 million or $1.19 per share, for the comparable period in 2002. TransCanada's net earnings for the nine months ended September 30, 2003 were $608 million or $1.26 per share compared to $567 million or $1.19 per share for the comparable period in 2002. The increase of $41 million or $0.07 per share in the first nine months of 2003 compared to the same period in 2002 was primarily due to higher net earnings from the Power business and lower net expenses in the Corporate segment, partially offset by lower net earnings from the Transmission segment. The Power segment net earnings for the nine months ended September 30, 2003 included $66 million after tax from TransCanada's investment in Bruce Power which was acquired in February February: see month. 2003 and a $19 million positive after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. earnings impact of a June June: see month. 2003 settlement with a former counterparty Counterparty The other participant, including intermediaries, in a swap or contract. which defaulted in 2001 under power forward contracts. This amount represents the value of power forward contracts terminated ter·mi·nate v. ter·mi·nat·ed, ter·mi·nat·ing, ter·mi·nates v.tr. 1. To bring to an end or halt: at the time of the counterparty's default. These increases are partially offset by reduced operating and other income from the Northeastern U.S. Operations, combined with higher general, administrative and support costs. The decrease in 2003 year-to-date net expenses in the Corporate segment compared to the same period in the prior year was primarily due to lower general and administrative expenses related to services that support discontinued operations, lower net interest costs and the positive impact of foreign exchange rates. The lower net earnings in the Transmission segment for the nine months ended September 30, 2003 compared to the same period in the prior year were primarily due to the decline in the Alberta System's 2003 net earnings reflecting the one-year adj. 1. completing its life cycle within a year. Adj. 1. one-year - completing its life cycle within a year; "a border of annual flowering plants" annual phytology, botany - the branch of biology that studies plants fixed revenue requirement settlement reached between TransCanada and its stakeholders in February 2003. In June 2002, TransCanada received the National Energy Board (NEB) decision on its Fair Return application (Fair Return decision) to determine the cost of capital to be included in the calculation of 2001 and 2002 final tolls on its Canadian Mainline. The results for the nine months ended September 30, 2002 included after-tax income of $30 million representing the impact of the Fair Return decision for 2001 ($16 million) and nine months ended September 30, 2002 ($14 million). The results for the nine months ended September 30, 2002 also included TransCanada's $7 million share of a favourable ruling for Great Lakes Great Lakes, group of five freshwater lakes, central North America, creating a natural border between the United States and Canada and forming the largest body of freshwater in the world, with a combined surface area of c.95,000 sq mi (246,050 sq km). related to Minnesota Minnesota, state, United States Minnesota (mĭn'ĭsō`tə), upper midwestern state of the United States. It is bordered by Lake Superior and Wisconsin (E), Iowa (S), South Dakota and North Dakota (W), and the Canadian provinces use tax paid in prior years. Funds generated from continuing operations of $516 million for third quarter 2003 increased $49 million compared to third quarter 2002. Funds generated from continuing operations of $1,407 million for the nine months ended September 30, 2003 increased $47 million compared to the same period last year.
Segment Results-at-a-Glance
Three months Nine months
ended ended
(unaudited) September 30 September 30
(millions of dollars) 2003 2002 2003 2002
----------------------------------------------- ----- ----- -----
Transmission 160 154 462 491
Power 50 35 176 116
Corporate (12) (14) (30) (40)
----- ----- ----- -----
Continuing operations 198 175 608 567
Discontinued operations 50 - 50 -
----- ----- ----- -----
Net Income 248 175 658 567
----- ----- ----- -----
----- ----- ----- -----
Transmission The Transmission business generated net earnings of $160 million and $462 million for the three and nine months ended September 30, 2003, respectively, compared to $154 million and $491 million for the same periods in 2002.
Transmission Results-at-a-Glance
Three months Nine months
ended ended
(unaudited) September 30 September 30
(millions of dollars) 2003 2002 2003 2002
----------------------------------------------- ----- ----- -----
Wholly-Owned Pipelines
Alberta System 50 56 136 158
Canadian Mainline 73 72 215 232
Foothills(a) 5 4 14 13
BC System - 1 4 4
----- ----- ----- -----
128 133 369 407
----- ----- ----- -----
North American Pipeline Ventures
Great Lakes 10 13 38 49
Iroquois 4 4 15 15
TC PipeLines, LP 4 4 11 12
Portland - - 7 2
Ventures LP 3 2 7 5
Trans Quebec & Maritimes 2 2 6 6
CrossAlta - 2 4 9
TransGas de Occidente 13 3 20 5
Northern Development (1) (3) (2) (5)
General, administrative,
support and other (3) (6) (13) (14)
----- ----- ----- -----
32 21 93 84
----- ----- ----- -----
Net earnings 160 154 462 491
----- ----- ----- -----
----- ----- ----- -----
(a) The remaining interests in Foothills, previously not held by TransCanada, were acquired in August 2003. Amounts in this table reflect TransCanada's proportionate interest in Foothills' earnings prior to the acquisition and 100 per cent interest thereafter. Wholly-Owned Pipelines The Alberta System's net earnings of $50 million in third quarter 2003 decreased $6 million compared to $56 million in the same quarter of 2002. Net earnings of $136 million for the nine months ended September 30, 2003 decreased $22 million compared to the same period in 2002. The decrease is primarily due to lower earnings from the one-year 2003 Alberta System Revenue Requirement Settlement (the 2003 Settlement) reached in February 2003. The 2003 Settlement includes a fixed revenue requirement component, before non-routine adjustments, of $1.277 billion compared to $1.347 billion in 2002. The Alberta System's annual net earnings in 2003, initially expected to be approximately $40 million lower than 2002 annual net earnings of $214 million, are now expected to be approximately $30 million below 2002 net earnings. This improved outlook for 2003 net earnings is primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to lower financing and operating costs operating costs npl → gastos mpl operacionales than initially anticipated. The Canadian Mainline's net earnings have increased $1 million and decreased $17 million for the three and nine months ended September 30, 2003, respectively, when compared to the corresponding periods in 2002. The decrease in year-to-date 2003 net earnings as compared to net earnings in the same period in 2002 is mainly due to the NEB's Fair Return decision, which resulted in the recognition in June 2002 of $16 million of net earnings related to the year ended December 31, 2001. Net earnings in 2003 reflect an increase in the approved rate of return on common equity from 9.53 per cent in 2002 to 9.79 per cent in 2003, offset by a lower average investment base. In December 2002, the NEB approved TransCanada's application to charge interim tolls for transportation service, effective January 1, 2003. In August 2003, the NEB approved interim tolls that the company will charge for the period September 1, 2003 to December 31, 2003. The NEB ordered that tolls will remain interim pending a decision from the Federal Court of Appeal on TransCanada's Fair Return Review and Variance Application. On August 15, 2003, TransCanada acquired the remaining interests of Foothills Pipe Lines Ltd. (Foothills) and its subsidiaries from Duke Energy Gas Transmission (Duke) for $259 million, including assumption of $154 million of Duke's proportionate share of Foothills' corporate debt. The net earnings prior to the acquisition reflect TransCanada's previous interests in Foothills. Prior to the acquisition, TransCanada directly and indirectly owned 50 per cent of Foothills, 69.5 per cent of Foothills (Sask.), 74.5 per cent of Foothills (Alta ALTA Alberta (Canada) ALTA AltaVista (stock symbol) ALTA American Land Title Association ALTA American Literary Translators Association ALTA Atlanta Lawn Tennis Association .) and 74.5 per cent of Foothills (South B.C.).
Operating Statistics
Nine months ended
September 30 Alberta Canadian BC
(unaudited) System(a) Mainline(b) Foothills(c) System
----------------------- ---------- ----------- ------------ ---------
2003 2002 2003 2002 2003 2002 2003 2002
---------- ----------- ------------ ---------
Average investment base
($millions) 4,909 5,089 8,601 8,909 742 (c) 237 204
Delivery volumes (Bcf)
Total 2,893 3,076 1,990 1,950 813 (c) 227 270
Average per day 10.6 11.3 7.3 7.1 3.0 (c) 0.8 1.0
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(a) Field receipt volumes for the Alberta System for the nine months ended September 30, 2003 were 2,926 Bcf (2002 - 3,094 Bcf); average per day was 10.7 Bcf (2002 - 11.3 Bcf). (b) Canadian Mainline deliveries originating at the Alberta border and in Saskatchewan Saskatchewan, province, Canada Saskatchewan (səskăch`əwən, –wän', săs'–), province (2001 pop. 978,933), 251,700 sq mi (651,903 sq km), W Canada. for the nine months ended September 30, 2003 were 1,572 Bcf (2002 - 1,665 Bcf); average per day was 5.8 Bcf (2002 - 6.1 Bcf). (c) The remaining interests in Foothills were acquired in August 2003. The year-to-date 2003 delivery volumes in the table represent 100 per cent of Foothills. North American Pipeline Ventures TransCanada's proportionate share of net earnings from its other Transmission businesses was $32 million and $93 million for the three and nine months ended September 30, 2003, respectively. Net earnings for third quarter 2003 were $11 million higher than the same quarter in 2002 primarily as a result of TransCanada's $11 million share of future income tax benefits recognized by TransGas de Occidente. In addition, there were higher operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before from Ventures LP, and lower spending on Northern Development. These increases were partially offset by lower contributions from CrossAlta, higher operating costs in Great Lakes and the impact of a weaker U.S. dollar. The 2002 year-to-date results included TransCanada's $7 million share of a favourable ruling for Great Lakes related to Minnesota use tax paid in prior years. Excluding the impact of the Great Lakes ruling in 2002, net earnings for the nine months ended September 30, 2003 increased $16 million compared to the same period in 2002. TransCanada's share of Portland's net earnings has increased $5 million for the nine months ended September 30, 2003 compared to the same period in 2002, primarily as a result of a rate settlement in early 2003 and a subsequent positive depreciation adjustment related to 2002 and recorded by TransCanada in 2003. In addition, earnings from TransGas de Occidente were higher as a result of higher contractual tolls and recognition of future income tax benefits. These increases were offset by lower earnings from CrossAlta and a weaker U.S. dollar. Power
Power Results-at-a-Glance
Three months Nine months
ended ended
(unaudited) September 30 September 30
(millions of dollars) 2003 2002 2003 2002
------------------------------------------------ ----- ----- -----
Western operations 26 40 129 101
Northeastern U.S. operations 30 27 91 114
Bruce Power L.P. investment 38 - 92 -
Power LP investment 8 9 26 27
General, administrative
and support costs (23) (17) (66) (48)
----- ----- ----- -----
Operating and other income 79 59 272 194
Financial charges (2) (3) (8) (9)
Income taxes (27) (21) (88) (69)
----- ----- ----- -----
Net earnings 50 35 176 116
----- ----- ----- -----
----- ----- ----- -----
Power's net earnings of $50 million in third quarter 2003 increased $15 million compared to $35 million in third quarter 2002. Earnings from the recently acquired interest in Bruce Power was the primary reason for the increase. Partially offsetting this increase was a lower contribution from Western Operations and higher general, administrative and support costs. Net earnings of $176 million for the nine months ended September 30, 2003 were $60 million higher when compared to the same period in 2002. Bruce Power earnings, a settlement in second quarter 2003 in Western Operations for the value of power forward contracts terminated with a former counterparty and the addition of the ManChief plant in late 2002 were the primary reasons for the increase. Partially offsetting the increase were lower earnings from the Northeastern U.S. Operations and higher general, administrative and support costs. Western Operations Operating and other income in Western Operations for the three months ended September 30, 2003 of $26 million was $14 million lower compared to the same period in 2002. The decrease is due to lower prices achieved on power sales as well as higher cost of natural gas fuel at the carbon black facility in southern Alberta Southern Alberta is a region located in the Canadian province of Alberta. As of the year 2004, the region's population was approximately 272,017[1][2]. in 2003, partially offset by contribution from the ManChief plant. Operating and other income in Western Operations for the nine months ended September 30, 2003 of $129 million was $28 million higher compared to the same period in 2002, mainly due to a $31 million pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta ($19 million after tax) positive earnings impact related to a June 2003 settlement with a former counterparty which defaulted in 2001 under power forward contracts. The ManChief acquisition in 2002 also contributed to higher operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. . Partially offsetting these increases were the effects in 2003 of lower prices achieved on the overall sale of power and higher cost of natural gas fuel at the carbon black facility. Northeastern U.S. Operations Operating and other income in Northeastern U.S. Operations of $30 million for the three months ended September 30, 2003 increased $3 million compared to the same period in 2002 primarily due to increased water flows through the Curtis Palmer palmer: see pilgrim. hydroelectric facility. Operating and other income in Northeastern U.S. Operations of $91 million for the nine months ended September 30, 2003 decreased $23 million compared to the same period in 2002 primarily due to the higher cost of natural gas fuel at Ocean State Power (OSP (Online Service Provider) See online service. OSP - Optical Signal Processor ) resulting from an arbitration arbitration Process of resolving a dispute or a grievance outside a court system by presenting it for decision to an impartial third party. Both sides in the dispute usually must agree in advance to the choice of arbitrator and certify that they will abide by the process, fewer market opportunities in the first half of 2003 than in 2002 and the unfavourable impact of a weaker U.S. dollar. OSP is currently in discussions with its natural gas fuel supplier regarding changes to the price of its fuel supply. Bruce Power L.P. Investment
Bruce Power L.P. (100 per cent basis)
Three months Nine months
ended ended
(unaudited) September 30, September 30,
(millions of dollars) 2003 2003
------------------------------------------------------- -------------
Revenues 297 939
Operating expenses 196 599
------------ -------------
Operating income 101 340
Financial charges 17 49
------------ -------------
Income before income taxes 84 291
------------ -------------
------------ -------------
TransCanada's interest in Bruce Power
income before income taxes(a) 27 66
Adjustments (b) 11 26
------------ -------------
TransCanada's income from Bruce Power
before income taxes 38 92
------------ -------------
------------ -------------
(a) TransCanada acquired its interest in Bruce Power on February 14, 2003. Bruce Bruce, Scottish royal family descended from an 11th-century Norman duke, Robert de Brus. He aided William I in his conquest of England (1066) and was given lands in England. Power's 100 per cent income before income taxes from February 14 to September 30, 2003 was $210 million. (b) See Note 7 to the September 30, 2003 financial statements for an explanation of the purchase price amortizations. Bruce Power contributed $38 million of pre-tax equity income in third quarter 2003 compared to $16 million in second quarter 2003. The increase reflected higher output compared to the second quarter 2003 when one of the Bruce B units was on a planned maintenance outage out·age n. 1. A quantity or portion of something lacking after delivery or storage. 2. A temporary suspension of operation, especially of electric power. for almost the entire second quarter. Overall prices achieved during third quarter 2003 were $45 per megawatt hour (MWh) which is consistent with second quarter 2003. The average price achieved for the nine months ended September 30, 2003 was approximately $49 per MWh. Approximately 34 per cent of the output was sold into Ontario's wholesale spot market in third quarter 2003 with the remainder being sold under longer term contracts. TransCanada's share of power output for third quarter 2003 was 2,041 gigawatt gig·a·watt n. Abbr. GW One billion (109) watts. hours (GWh) compared to 1,681 GWh in second quarter 2003. The Bruce B units ran at an average availability of 94 per cent for third quarter 2003. The average availability during TransCanada's period of ownership ending September 30, 2003 was 88 per cent. On October 7, 2003, Bruce A Unit 4 began producing electricity to the Ontario electricity grid grid: see electron tube. (1) Any interconnected set of nodes such as the electric power network or a communications network. (2) "The Grid" is a nickname for Internet2. See Internet2. . After performing and evaluating tests of the shutdown shut·down n. A cessation of operations or activity, as at a factory. shutdown Noun the closing of a factory, shop, or other business Verb shut down system, Bruce A Unit 4 is expected to reconnect to the grid and will begin ramping up to full power. Bruce Power is also working towards removal of the Canadian Nuclear Safety Commission The Canadian Nuclear Safety Commission (CNSC), previously known as the "Atomic Energy Control Board" (AECB), is best described as the nuclear energy and materials watchdog in Canada. shutdown guarantees on Bruce A Unit 3. Following removal of the shut down guarantees, Bruce A Unit 3 will undergo similar commissioning tests and procedures as with Bruce A Unit 4. The cumulative restart To resume computer operation after a planned or unplanned termination. See boot, warm boot and checkpoint/restart. cost incurred by Bruce Power to the end of September 2003 for the two Bruce A units was approximately $688 million. Bruce Power has incurred approximately $315 million on the two unit restart program in the first nine months of 2003, of which $80 million was incurred in third quarter 2003. TransCanada has a 31.6 per cent interest in Bruce Power. Equity income from Bruce Power is directly impacted by fluctuations in wholesale spot market prices for electricity as well as overall plant availability, which in turn, is impacted by scheduled and unscheduled unscheduled Adjective not planned or intended Adj. 1. unscheduled - not scheduled or not on a regular schedule; "an unscheduled meeting"; "the plane made an unscheduled stop at Gander for refueling" maintenance. Bruce B Unit 8 began scheduled maintenance on September 20, 2003 which is expected to continue into the middle of fourth quarter 2003. To reduce its exposure to spot market prices, Bruce Power has entered into fixed price sales contracts Sales Contract Contract between a seller and buyer for the sale of goods, services, or both. for approximately 1,850 megawatts (MW) of output for the remainder of 2003. Power LP Investment Operating and other income of $8 million and $26 million for the three and nine months ended September 30, 2003, was consistent with the same periods in 2002. General, Administrative and Support Costs General, administrative and support costs for the three and nine months ended September 30, 2003 increased $6 million and $18 million, respectively, compared to the same periods in 2002, mainly reflecting higher support costs as part of the company's continued investment in Power.
Power Sales Volumes(a)
Three months Nine months
ended ended
(unaudited) September 30 September 30
(GWh) 2003 2002 2003 2002
----------------------------------------------------- -------------
Western operations 3,068 2,876 9,324 9,201
Northeastern U.S. operations 1,719 1,542 5,112 4,117
Bruce Power L.P. investment(b) 2,041 n/a 4,809 n/a
Power LP investment 582 651 1,604 1,779
----- ----- ----- -----
Total 7,410 5,069 20,849 15,097
----------------------------------------------------- --------------
----------------------------------------------------- --------------
(a) Power sales volumes include TransCanada's share of Bruce Power L.P. output (31.6 per cent) and the Sundance Sundance is a popular ski resort located near Provo, Utah. It was bought by the actor Robert Redford in 1968. Redford's wife was from Utah and they had built a home in the area five years earlier. B power purchase arrangement (50 per cent). (b) Acquired in February 2003. Sales volumes reflect TransCanada's share for the period February 14, 2003 to September 30, 2003.
Weighted Average Plant Availability(a) Three months Nine months
ended ended
September 30 September 30
(unaudited) 2003 2002 2003 2002
----------------------------------------------------- -------------
Western operations 91% 98% 93% 97%
Northeastern U.S. operations 99% 99% 92% 99%
Bruce Power L.P. investment(b) 94% n/a 88% n/a
Power LP investment 99% 98% 95% 94%
All plants 96% 99% 91% 97%
----------------------------------------------------- -------------
----------------------------------------------------- -------------
(a) Plant availability is reduced by planned and unplanned outages. (b) Acquired in February 2003. TransCanada's availability reflects the period February 14, 2003 to September 30, 2003 and refers only to the Bruce B units. Corporate Net expenses were $12 million and $14 million for the three months ended September 30, 2003 and 2002, respectively. This $2 million decrease in net expenses for third quarter 2003 is mainly due to lower general and administrative expenses related to services that support discontinued operations. Net expenses were $30 million for the nine months ended September 30, 2003 compared to $40 million for the same period in 2002. This $10 million decrease is primarily due to lower general and administrative expenses related to services that support discontinued operations, lower net interest costs and the positive impact of foreign exchange rates compared to the same period in the prior year. Discontinued Operations The Board of Directors approved a plan in July 2001 to dispose of To determine the fate of; to exercise the power of control over; to fix the condition, application, employment, etc. of; to direct or assign for a use. See also: Dispose the company's Gas Marketing business. The company's exit from Gas Marketing was substantially completed by December 31, 2001. The company mitigated mit·i·gate v. mit·i·gat·ed, mit·i·gat·ing, mit·i·gates v.tr. To moderate (a quality or condition) in force or intensity; alleviate. See Synonyms at relieve. v.intr. To become milder. its exposures associated with the contingent liabilities Contingent Liability 1. The possibility of an obligation to pay certain sums dependent on future events. 2. Defined obligations by a company that must be met, but the probability of payment is minimal. Notes: 1. related to the divested gas marketing operations by obtaining from a subsidiary of Mirant Mirant Services LLC, an Atlanta-based energy company, produces and sells electricity in the United States, the Caribbean, and the Philippines. The company was spun-off from parent, Southern Company, on April 2, 2001. Corporation (Mirant) certain remaining contracts in June and July 2003, and simultaneously si·mul·ta·ne·ous adj. 1. Happening, existing, or done at the same time. See Synonyms at contemporary. 2. Mathematics hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. the market price exposures of these contracts. The company remains contingently con·tin·gent adj. 1. Liable to occur but not with certainty; possible: "All salaries are reckoned on contingent as well as on actual services" Ralph Waldo Emerson. liable liable adj. responsible or obligated. Thus, a person or entity may be liable for damages due to negligence, liable to pay a debt, liable to perform an act for which he/she/it contracted to do, or liable to punishment for commission of a crime. for certain residual Residual See:Residual value obligations. At September 30, 2003, TransCanada reviewed the provision for loss on discontinued operations and the deferred gain, taking into consideration the impacts of Mirant's filing for bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most protection in July 2003 and the mitigation MITIGATION. To make less rigorous or penal. 2. Crimes are frequently committed under circumstances which are not justifiable nor excusable, yet they show that the offender has been greatly tempted; as, for example, when a starving man steals bread to satisfy of the contingent liabilities referred to above. As a result of this review, $50 million of the original approximately $100 million after-tax deferred gain was recognized in income in third quarter 2003. In addition, TransCanada concluded that the remaining provision was adequate, and the deferral deferral - Waiting for quiet on the Ethernet. of the remaining approximately $50 million of deferred after-tax gains related to the divested Gas Marketing business was appropriate. Liquidity and Capital Resources Funds Generated from Operations Funds generated from continuing operations were $516 million and $1,407 million for the three and nine months ended September 30, 2003, respectively, compared with $467 million and $1,360 million for the same periods in 2002. TransCanada expects that its ability to generate sufficient amounts of cash in the short term and the long term when needed, and to maintain financial capacity and flexibility to provide for planned growth is adequate and remains substantially unchanged since December 31, 2002. Investing Activities In the three and nine months ended September 30, 2003, capital expenditures, excluding acquisitions, totalled $81 million (2002 - $182 million) and $264 million (2002 - $397 million), respectively, and related primarily to Iroquois' ongoing Eastchester Expansion project into New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. , maintenance and capacity capital in wholly-owned pipelines and ongoing construction of the MacKay Mackay (məkī`), city (1991 pop. 40,250), Queensland, NE Australia on the Pioneer River. A port city, Mackay exports sugar, beef, and coal. River power plant in Alberta. Acquisitions for the nine months ended September 30, 2003 totalled $547 million (2002 - $19 million) and were primarily comprised of: -- in third quarter 2003, the acquisition of the remaining interests in Foothills for approximately $105 million -- in third quarter 2003, the increase in interest in Portland Natural Gas Transmission System (PNGTS) to 43.42 per cent for approximately US$19.3 million, and -- in first quarter 2003, the acquisition of a 31.6 per cent interest in Bruce Power for approximately $409 million including closing adjustments. In addition, TransCanada assumed $154 million of debt on the Foothills acquisition. Financing Activities TransCanada used a portion of its cash resources to fund long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. maturities of $386 million in the nine months ended September 30, 2003. In June 2003, the company issued US$350 million of ten year notes bearing interest at 4.00 per cent. For the nine months ended September 30, 2003 outstanding notes payable increased by $279 million, while cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments also increased by $195 million. In July 2003, TransCanada redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. all of its outstanding US$160 million, 8.75 per cent Junior Subordinated Debentures subordinated debenture An unsecured bond with a claim to assets that is subordinate to all existing and future debt. Thus, in the event that the issuer encounters financial difficulties and must be liquidated, all other claims must be satisfied before , also known as Cumulative Trust Originated Preferred Securities. Holders of these debentures received US$25.0122 per US$25.00 of the principal amount, which included accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. and unpaid interest to the redemption date Redemption date The date on which a bond matures or is redeemed. redemption date The date on which a debt security is scheduled to be redeemed by the issuer. The redemption date is the scheduled maturity date or, if applicable, a call date. . Dividends On October 28, 2003, TransCanada's Board of Directors declared a quarterly dividend of $0.27 per share for the quarter ending December 31, 2003 on the outstanding common shares. This is the 160th consecutive quarterly dividend paid by TransCanada and its subsidiary on its common shares, and is payable on January 30, 2004 to shareholders of record at the close of business on December 31, 2003. Risk Management With respect to continuing operations, TransCanada's market, financial and counterparty risks Counterparty Risk The risk to each party of a contract that the counterparty will not live up to their contractual obligations. Notes: In most financial contracts, counterparty risk is known as default risk. remain substantially unchanged since December 31, 2002. See explanation for discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: operations' risk management activity under Results of Operations - Discontinued Operations. For further information on risks, refer to Management's Discussion and Analysis in TransCanada PipeLines Limited's 2002 Annual Report. The processes within TransCanada's risk management function are designed to ensure that risks are properly identified, quantified, reported and managed. Risk management strategies, policies and limits are designed to ensure TransCanada's risk-taking is consistent with its business objectives and risk tolerance Risk Tolerance The degree of uncertainty that an investor can handle in regards to a negative change in the value of their portfolio. Notes: An investor's risk tolerance varies according to age, income requirements, financial goals, etc. . Risks are managed within limits ultimately established by the Board of Directors and implemented by senior management, monitored by risk management personnel and audited by internal audit personnel. TransCanada manages market and financial risk exposures in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with its corporate market risk policy and position limits. The company's primary market risks result from volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the in commodity prices, interest rates and foreign currency exchange rates. TransCanada's counterparty risk exposure results from the failure of a counterparty to meet its contractual financial obligations, and is managed in accordance with its corporate counterparty risk policy. Controls and Procedures As of the end of the period covered by this quarterly report, TransCanada's management together with TransCanada's President and Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design and operation of the company's disclosure controls and procedures. Based on this evaluation, the President and Chief Executive Officer and the Chief Financial Officer of TransCanada have concluded that the disclosure controls and procedures are effective. There were no changes in TransCanada's internal control over financial reporting during the most recent fiscal quarter that have materially affected or are reasonably likely to materially affect TransCanada's internal control over financial reporting. Critical Accounting Policy TransCanada's critical accounting policy, which remains unchanged since December 31, 2002, is the use of regulatory accounting for its regulated reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. operations. For further information on this critical accounting policy, refer to Management's Discussion and Analysis in TransCanada PipeLines Limited's 2002 Annual Report. Critical Accounting Estimates Since a determination of many assets, liabilities, revenues and expenses is dependent upon future events, the preparation of the company's consolidated financial statements requires the use of estimates and assumptions which have been made using careful judgment. TransCanada's critical accounting estimates from December 31, 2002 continue to be depreciation expense and certain deferred after-tax gains and remaining obligations related to the Gas Marketing business. For further information on these critical accounting estimates, refer to Results of Operations - Discontinued Operations and to Management's Discussion and Analysis in TransCanada PipeLines Limited's 2002 Annual Report. Outlook The company expects higher Power Higher power is a term used in a 12-step program, such as Alcoholics Anonymous, to describe "a power greater than yourself." Although many participants equate their higher power with God, a belief in God or in formal religion is not mandatory; the higher power is intended as a net earnings in 2003 than originally anticipated as a result of the contribution from Bruce Power and the settlement with a former counterparty. The outlook for the Alberta System has improved since December 2002 as discussed under Results of Operations in the Transmission segment. The outlook for the company's other segments remains relatively unchanged since December 31, 2002. For further information on outlook, refer to Management's Discussion and Analysis in TransCanada PipeLines Limited's 2002 Annual Report. The company's net earnings and cash flow combined with a strong balance sheet continue to provide the financial flexibility for TransCanada to make disciplined investments in its core businesses of Transmission and Power. The strengthening of the Canadian dollar compared to the U.S. dollar in 2003 has not and is not expected to significantly impact TransCanada's consolidated financial results. Credit ratings on TransCanada PipeLines Limited's senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. by Dominion Bond Rating Service Dominion Bond Rating Service is a credit rating agency based in Toronto, Ontario. Founded in 1976, it is one of the largest credit rating agencies in Canada. It is one of five Nationally Recognized Statistical Rating Organizations in the United States, though significantly smaller Limited (DBRS DBRS Dominion Bond Rating Service ), Moody's Investors Service Moody's Investors Service A leading global credit rating, research and risk analysis firm. Moody's Investors Service A leading firm engaged in credit rating, risk analysis, and research of fixed-income securities and their issuers. (Moody's Moody's Corporation (NYSE: MCO) is the holding company for Moody's Investors Service which performs financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized ratings scale. ) and Standard & Poor's are currently A, A2 and A-, respectively. DBRS and Moody's both maintain a 'stable' outlook on their ratings and Standard & Poor's maintains a 'negative' outlook on its rating. Other Recent Developments Transmission Wholly-Owned Pipelines Alberta System In July 2003, TransCanada, along with other utilities, filed evidence in the Generic Cost of Capital Proceeding with the Alberta Energy and Utilities Board (EUB). TransCanada has requested a return on capital of 11 per cent based on a deemed common equity of 40 per cent in its Generic Cost of Capital Application. The EUB expects to adopt a standardized approach to determining the rate of return and capital structure for all utilities under its jurisdiction at the conclusion of this proceeding. This hearing is scheduled to commence on November 12, 2003. In September 2003, TransCanada filed with the EUB the first phase of the 2004 General Rate Application (GRA), consisting of evidence in support of the applied for rate base and revenue requirement. In the GRA, the company applied for a composite depreciation rate of 4.13 per cent compared to the current depreciation rate of 4.00 per cent. An EUB hearing to consider the 2004 GRA Phase One application is scheduled to commence on March 16, 2004 in Calgary. Phase Two of the application, dealing primarily with rate design and services, is expected to be filed with the EUB on November 14, 2003. Canadian Mainline In July 2003, the NEB issued its decision on TransCanada's 2003 Mainline Tolls Application. In this decision, the NEB approved all key components of the application including an increase in the composite depreciation rate from 2.89 per cent to 3.42 per cent, introduction of a new tolling zone in southwestern Ontario, an increase to the Interruptible Transportation bid floor price and continuation of the Fuel Gas Incentive Program. The rates included in this decision are still considered interim pending the disposition of TransCanada's appeal to the Federal Court of Appeal regarding the NEB's Review and Variance (RH-R-1-2002) decision. In July 2003, TransCanada filed a notice of appeal with the Federal Court of Appeal and served notice of appeal on interested parties of the Review and Variance application. The case is expected to be heard in an oral hearing late this year or in the first quarter of 2004. Foothills In August 2003, TransCanada completed its purchase of the remaining interests of Foothills and its subsidiaries from Duke for $259 million, including assumption of $154 million of Duke's proportionate share of Foothills' corporate debt. As a result, TransCanada now owns 100 per cent of Foothills and its subsidiaries. Foothills and its subsidiaries hold the certificates to build the Canadian portion of the Alaska Highway Alaska Highway, all-weather road, 1,523 mi (2,451 km) long, extending NW from Dawson Creek, British Columbia, to Fairbanks, Alaska. An extension of an existing Canadian road between Dawson Creek and Edmonton, Alta., the Alaska Highway was constructed (Mar.–Sept. Project which would bring Prudhoe Bay Prudhoe Bay, inlet of the Beaufort Sea and Arctic Ocean, N Alaska, in the Alaska North Slope region, east of the Colville River delta. In 1968 one of the largest oil reserves in North America was discovered in Prudhoe Bay. natural gas from Alaska Alaska (əlă`skə), largest in area of the United States but third smallest (exceeding only Vermont and Wyoming) in population, occupying the northwest extremity of the North American continent, separated from the coterminous United States to markets in Canada and the United States. The "prebuild" portion of this project has been operating for more than 20 years, moving Alberta gas to U.S. markets in advance of flows from Alaska. Subsidiaries of Foothills and TransCanada also hold certificates to build the Alaskan section of this project. North American Pipeline Ventures Portland In third quarter 2003, TransCanada exercised its contractual right to increase its ownership interest in PNGTS to 43.42 per cent from 33.29 per cent. On September 29, 2003, the additional interest was purchased from DTE East Coast Pipelines Company for approximately US$47.1 million, including approximately US$27.8 million of assumed debt. On October 18, 2003, TransCanada entered into an agreement to acquire El Paso Corporation's (El Paso) 29.64 per cent interest in PNGTS for approximately US$137.2 million, including approximately US$80.7 million of assumed debt. The transaction is expected to be completed by the end of this year and is subject to the satisfaction of various closing conditions including the right of first offer provisions. Under the terms of the PNGTS partnership agreement, the other PNGTS partner, Gaz Metropolitain and Company, Limited Partnership (Gaz Metropolitain), has the right to acquire its pro rata share of El Paso's offered interest. This right is exercisable for a period of thirty days after receipt of formal notice from El Paso. Should this right of first offer not be exercised, TransCanada's interest in Portland will increase to 73.06 per cent from 43.42 per cent. Should Gaz Metropolitain's right of first offer be exercised, TransCanada's total interest will increase to 61.71 per cent. The purchase price paid by TransCanada would be reduced proportionately. PNGTS operates a 471 kilometre, 220 million cubic feet per day interstate natural gas pipeline which connects with the Trans Quebec & Maritimes Pipeline (50 per cent owned by TransCanada) near Pittsburg, New Hampshire. Iroquois Iroquois Any of the North American Indian tribes speaking a language of the Iroquoian family and living at the time of European contact in a continuous territory around Lakes Ontario, Huron, and Erie. The Eastchester expansion project is experiencing construction delays, which has resulted in a postponement of the expected in-service date. Liquefied Natural Gas In September 2003, TransCanada and ConocoPhillips Company announced the Fairwinds partnership to jointly evaluate a site in Harpswell, Maine Harpswell is a town in Cumberland County Maine which is geographically within Casco Bay in the Gulf of Maine. The town is composed of land contiguous with the rest of Cumberland County, as well as a several large and small islands, including Great Island, Orr's Island, and Bailey for the development of a liquefied natural gas (LNG) regasification facility. The residents of the Town of Harpswell have been asked to vote on leasing a town-owned site for the facility. If leasing of the site is approved and necessary regulatory approvals are subsequently received, construction of the LNG facility could begin in 2006 with the facility becoming operational in 2009. Natural gas from the LNG facility would be delivered by pipeline to markets in the northeast U.S. Power In August 2003, TransCanada successfully commenced operations under a fee for service power purchase arrangement with the Ontario government through the Ontario Electricity Financial Corporation (OEFC OEFC Ontario Electricity Finance Corporation (Canada) OEFC Oadby Evangelical Free Church (Leicester, UK) ). Under the agreement, TransCanada will supply 110 MW from a temporary facility adjacent to the Canadian Mainline near Cobourg, Ontario Cobourg (2006 population 18,210) is a town some 110 kilometers east of Toronto in the Canadian province of Ontario. It is the largest town in and the seat of Northumberland County, Ontario; its nearest neighbour is Port Hope, 7 km to the west. , for a period ending as early as December 31, 2003. The OEFC retains an option to extend the service contract until April 30, 2004. The Cobourg Co´bourg n. 1. A thin worsted fabric for women's dresses. facility was fully functional and in-service August 10, 2003. A power blackout affecting much of Ontario and the northeastern U.S. on August 14, 2003 created unplanned outages for some of TransCanada's power plants. Most facilities were brought back on-line within hours and TransCanada was also able to deliver additional power to the Ontario market through its Cobourg facility. This power blackout did not have a material impact on TransCanada's net earnings. On October 24, 2003, TransCanada and Grandview Cogeneration Corporation, an affiliate of Irving Oil Limited (Irving), announced an agreement to build a 90 MW natural gas-fired cogeneration power plant in Saint John, New Brunswick at an estimated capital cost of $85 million. This cogeneration facility will be developed and owned by TransCanada. Under a 20 year tolling arrangement, Irving will provide fuel for the plant and contract for 100 per cent of the plant's heat and electricity output. Pending regulatory approvals, construction of the plant is expected to begin in November 2003 with an anticipated in-service date by the end of 2004. Forward-Looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. Information Certain information in this quarterly report is forward-looking and is subject to important risks and uncertainties. The results or events predicted in this information may differ from actual results or events. Factors which could cause actual results or events to differ materially from current expectations include, among other things, the ability of TransCanada to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits, the availability and price of energy commodities, regulatory decisions, competitive factors in the pipeline and power industry sectors, and the prevailing economic conditions in North America. For additional information on these and other factors, see the reports filed by TransCanada with Canadian securities regulators and with the United States Securities and Exchange Commission. TransCanada disclaims any intention or obligation to update or revise any forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , whether as a result of new information, future events or otherwise.
Consolidated Income
(unaudited) Three months ended Nine months ended
(millions of dollars September 30 September 30
except per share amounts) 2003 2002 2003 2002
------------------------------------------
Revenues 1,391 1,285 4,038 3,876
Operating Expenses
Cost of sales 164 163 533 466
Other costs and expenses 439 386 1,248 1,123
Depreciation 260 211 692 631
------------------------------------------
863 760 2,473 2,220
------------------------------------------
Operating Income 528 525 1,565 1,656
Other Expenses/(Income)
Financial charges 210 213 619 652
Financial charges of
joint ventures 18 22 63 67
Equity income (67) (8) (151) (26)
Interest and other income (9) (14) (44) (36)
------------------------------------------
152 213 487 657
------------------------------------------
Income from Continuing
Operations before Income
Taxes and Non-Controlling
Interests 376 312 1,078 999
Income Taxes - Current
and Future 164 123 427 389
Non-Controlling Interests
Preferred securities charges 8 8 26 26
Preferred share dividends 6 6 17 17
------------------------------------------
Net Income from Continuing
Operations 198 175 608 567
Net Income from Discontinued
Operations 50 - 50 -
------------------------------------------
Net Income 248 175 658 567
------------------------------------------
------------------------------------------
Net Income Per Share
Continuing operations $0.41 $0.37 $1.26 $1.19
Discontinued operations 0.10 - 0.10 -
------------------------------------------
Basic $0.51 $0.37 $1.36 $1.19
------------------------------------------
------------------------------------------
Diluted $0.51 $0.36 $1.36 $1.18
------------------------------------------
------------------------------------------
Average Shares Outstanding
- Basic (millions) 482.1 478.9 481.1 478.0
------------------------------------------
------------------------------------------
Average Shares Outstanding
- Diluted (millions) 484.4 481.3 483.2 480.2
------------------------------------------
------------------------------------------
See accompanying Notes to the Consolidated Financial Statements.
Consolidated Cash Flows
(unaudited) Three months ended Nine months ended
(millions of dollars) September 30 September 30
2003 2002 2003 2002
---------------------------------------------------------------------
Cash Generated From
Operations
Net income from
continuing operations 198 175 608 567
Depreciation 260 211 692 631
Future income taxes 121 71 248 180
Equity income in excess of
distributions received (66) (1) (125) (6)
Non-controlling interests 14 14 43 43
Other (11) (3) (59) (55)
------------------------------------------
Funds generated from
continuing operations 516 467 1,407 1,360
Decrease/(increase) in
operating working capital 67 (12) 83 (68)
------------------------------------------
Net cash provided by
continuing operations 583 455 1,490 1,292
Net cash provided
by/(used in) discontinued
operations 67 (21) (17) 30
------------------------------------------
650 434 1,473 1,322
------------------------------------------
Investing Activities
Capital expenditures (81) (182) (264) (397)
Acquisitions, net of
cash acquired (135) (19) (547) (19)
Disposition of assets - - 5 -
Deferred amounts and other (168) 62 (238) (12)
------------------------------------------
Net cash used in investing
activities (384) (139) (1,044) (428)
------------------------------------------
Financing Activities
Dividends and preferred
securities charges (150) (140) (438) (407)
Notes payable
issued/(repaid), net 361 12 279 (228)
Long-term debt issued - - 475 -
Reduction of long-term
debt (327) (114) (386) (230)
Non-recourse debt of joint
ventures issued 14 19 60 24
Reduction of non-recourse
debt of joint ventures (7) (9) (55) (51)
Redemption of junior
subordinated debentures (218) - (218) -
Common shares issued 11 12 49 43
------------------------------------------
Net cash used in
financing activities (316) (220) (234) (849)
------------------------------------------
------------------------------------------
(Decrease)/Increase in Cash
and Short-Term Investments (50) 75 195 45
Cash and Short-Term
Investments
Beginning of period 457 269 212 299
------------------------------------------
------------------------------------------
Cash and Short-Term
Investments
End of period 407 344 407 344
------------------------------------------
------------------------------------------
Supplementary Cash Flow
Information
Income taxes paid 68 50 192 205
Interest paid 186 217 618 639
------------------------------------------
------------------------------------------
See accompanying Notes to the Consolidated Financial Statements.
Consolidated Balance Sheet
September 30, 2003 December 31,
(millions of dollars) (unaudited) 2002
---------------------------------------------------------------------
ASSETS
Current Assets
Cash and short-term investments 407 212
Accounts receivable 548 691
Inventories 174 178
Other 83 102
-------------------------------
1,212 1,183
Long-Term Investments 792 291
Plant, Property and Equipment 17,076 17,496
Other Assets 1,246 946
-------------------------------
20,326 19,916
-------------------------------
-------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable 576 297
Accounts payable 806 902
Accrued interest 229 227
Current portion of long-term debt 526 517
Current portion of non-recourse debt of
joint ventures 20 75
Provision for loss on discontinued
operations 168 234
-------------------------------
2,325 2,252
Deferred Amounts 424 353
Long-Term Debt 9,233 8,815
Future Income Taxes 434 226
Non-Recourse Debt of Joint Ventures 803 1,222
Junior Subordinated Debentures 21 238
-------------------------------
13,240 13,106
-------------------------------
Non-Controlling Interests
Preferred securities of subsidiary 673 674
Preferred shares of subsidiary 389 389
-------------------------------
1,062 1,063
-------------------------------
Shareholders' Equity
Common shares 4,663 4,614
Contributed surplus 267 265
Retained earnings 1,123 854
Foreign exchange adjustment (29) 14
-------------------------------
6,024 5,747
-------------------------------
20,326 19,916
-------------------------------
-------------------------------
See accompanying Notes to the Consolidated Financial Statements.
Consolidated Retained Earnings
(unaudited) Nine months ended September 30
(millions of dollars) 2003 2002
-------------------------------
Balance at beginning of period 854 586
Net income 658 567
Common share dividends (389) (359)
-------------------------------
1,123 794
-------------------------------
-------------------------------
See accompanying Notes to the Consolidated Financial Statements.
Notes to Consolidated Financial Statements (Unaudited) 1. Basis of Presentation Pursuant to a plan of arrangement, effective May 15, 2003, common shares of TransCanada PipeLines Limited (TCPL) were exchanged on a one-to-one one-to-one adj. 1. Allowing the pairing of each member of a class uniquely with a member of another class. 2. Mathematics basis for common shares of TransCanada Corporation (TransCanada or the company). As a result, TCPL became a wholly-owned subsidiary of TransCanada. The consolidated financial statements for the nine months ended September 30, 2003 include the accounts of TransCanada and the consolidated accounts of all its subsidiaries, including TCPL. Comparative information for the nine months ended September 30, 2002 is that of TCPL and its wholly-owned subsidiaries at that time. The financial statements of TransCanada have been prepared using the continuity of interests method of accounting. Accordingly, the financial statements of TransCanada on the effective date, on a consolidated basis, were in all material respects the same as those of TCPL immediately prior to the arrangement, except that the preferred securities and preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. of TCPL have been reflected as non-controlling interests in the consolidated financial statements of TransCanada. In addition, the distributions on the preferred securities and the dividends on the preferred shares have been reflected as non-controlling interest charges in determining the consolidated net income of TransCanada. 2. Significant Accounting Policies The consolidated financial statements of TransCanada have been prepared in accordance with Canadian generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting . The accounting policies applied are consistent with those outlined in TCPL's annual financial statements for the year ended December 31, 2002. These consolidated financial statements reflect all normal recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. adjustments that are, in the opinion of management, necessary to present fairly the financial position and results of operations for the respective periods. These consolidated financial statements do not include all disclosures required in the annual financial statements and should be read in conjunction with the annual financial statements included in TransCanada PipeLines Limited's 2002 Annual Report. Amounts are stated in Canadian dollars unless otherwise indicated. Certain comparative figures have been reclassified to conform with the current period's presentation. Since a determination of many assets, liabilities, revenues and expenses is dependent upon future events, the preparation of these consolidated financial statements requires the use of estimates and assumptions. In the opinion of Management, these consolidated financial statements have been properly prepared within reasonable limits of materiality MATERIALITY. That which is important; that which is not merely of form but of substance. 2. When a bill for discovery has been filed, for example, the defendant must answer every material fact which is charged in the bill, and the test in these cases seems to and within the framework of the company's significant accounting policies.
3. Segmented Information
Transmission Power Corporate Total
---------------------------------------------------------------------
Three months ended
September 30
(unaudited
- millions of
dollars) 2003 2002 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Revenues 1,070 971 321 314 - - 1,391 1,285
Cost of sales - - (164) (163) - - (164) (163)
Other costs and
expenses (339) (301) (99) (81) (1) (4) (439) (386)
Depreciation (240) (196) (19) (15) (1) - (260) (211)
---------------------------------------------------------------------
Operating
income/(loss) 491 474 39 55 (2) (4) 528 525
Financial and
non-controlling
interest charges (198) (202) (2) (3) (24) (22) (224) (227)
Financial charges
of joint ventures (18) (22) - - - - (18) (22)
Equity income 29 8 38 - - - 67 8
Interest and other
income 3 6 2 4 4 4 9 14
Income taxes (147) (110) (27) (21) 10 8 (164) (123)
---------------------------------------------------------------------
Continuing
Operations 160 154 50 35 (12) (14) 198 175
-------------------------------------------------------
-------------------------------------------------------
Discontinued
Operations 50 -
-------------
Net Income 248 175
-------------
-------------
Transmission Power Corporate Total
---------------------------------------------------------------------
Nine months ended
September 30
(unaudited
- millions of
dollars) 2003 2002 2003 2002 2003 2002 2003 2002
---------------------------------------------------------------------
Revenues 2,974 2,914 1,064 962 - - 4,038 3,876
Cost of sales - - (533) (466) - - (533) (466)
Other costs and
expenses (944) (847) (299) (268) (5) (8)(1,248)(1,123)
Depreciation (629) (586) (62) (45) (1) - (692) (631)
---------------------------------------------------------------------
Operating
income/(loss) 1,401 1,481 170 183 (6) (8) 1,565 1,656
Financial and
non-controlling
interest
charges (588) (616) (7) (9) (67) (70) (662) (695)
Financial charges
of joint
ventures (62) (67) (1) - - - (63) (67)
Equity income 59 26 92 - - - 151 26
Interest and other
income 11 12 10 11 23 13 44 36
Income taxes (359) (345) (88) (69) 20 25 (427) (389)
---------------------------------------------------------------------
Continuing
Operations 462 491 176 116 (30) (40) 608 567
------------------------------------------------------
------------------------------------------------------
Discontinued
Operations 50 -
--------------
Net Income 658 567
--------------
--------------
Total Assets September 30, 2003 December 31,
(millions of dollars) (unaudited) 2002
---------------------------------------------------------------------
Transmission 16,667 16,979
Power 2,675 2,292
Corporate 854 457
---------------------------------------------------------------------
Continuing Operations 20,196 19,728
Discontinued Operations 130 188
---------------------------------------------------------------------
20,326 19,916
---------------------------------------------------------------------
---------------------------------------------------------------------
4. Junior Subordinated Debentures On July 3, 2003, the company redeemed the US$160 million 8.75 per cent Junior Subordinated Debentures. Holders of these debentures received US$25.0122 per US$25.00 of the principal amount, which included accrued and unpaid interest to the redemption date, without premium or penalty. 5. Risk Management and Financial Instruments The following represents the significant changes to the company's risk management and financial instruments since December 31, 2002. Foreign Investments At September 30, 2003 and December 31, 2002, the company had foreign currency denominated assets and liabilities which created an exposure to changes in exchange rates. The company uses foreign currency derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. to hedge this net exposure on an after-tax basis After-tax basis The comparison basis used to analyze the net after-tax returns on a corporate taxable bond and a municipal tax-free bond. . The company's portfolio of foreign investment derivatives is comprised of contracts for periods up to four years. The fair values shown in the table below for foreign exchange risk are offset by translation gains or losses on the net assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. and are recorded in the foreign exchange adjustment in Shareholders' Equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. .
Asset/(Liability) September 30, 2003
(millions of dollars) (unaudited) December 31, 2002
---------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------------------------------------------------------------------
Foreign Exchange Value
Cross-currency swaps
U.S. dollars 51 51 (8) (8)
---------------------------------------------------------------------
---------------------------------------------------------------------
At September 30, 2003, the notional principal amount of
cross-currency swaps was US$250 million
(December 31, 2002 - US$350 million).
Reconciliation of Foreign
Exchange Adjustment September 30, 2003 December 31,
(millions of dollars) (unaudited) 2002
---------------------------------------------------------------------
Balance at beginning of period 14 13
Translation (losses)/gains on
foreign currency denominated
net assets (115) 3
Foreign exchange gains/(losses)
on derivatives, and other 72 (2)
---------------------------------------------------------------------
Balance at end of period (29) 14
---------------------------------------------------------------------
---------------------------------------------------------------------
6. Stock-Based Compensation TransCanada's accounting policy is to expense stock options. This charge is reflected in the Transmission and Power segments. In the nine months ended September 30, 2003, TransCanada issued 1,503,200 options to purchase common shares at a weighted average price of $22.42 under the company's Key Employee Stock Incentive Plan. Amounts expensed for the three and nine months ended September 30, 2003 were approximately $1 million and approximately $2 million, respectively. The company used the Black-Scholes model for these calculations with the weighted average assumptions being 4 years of expected life, 4.1 per cent interest rate, 18 per cent volatility and 4.5 per cent dividend yield. 7. Discontinued Operations In July 2001, the Board of Directors approved a plan to dispose of the company's Gas Marketing business. In December 1999, the Board of Directors approved a plan (December Plan) to dispose of the company's International, Canadian Midstream mid·stream n. 1. The middle part of a stream. 2. The part of a course that is neither at the beginning nor at the end: the midstream of life. Noun 1. and certain other businesses. The company's disposals under both plans were substantially completed at December 31, 2001. The company mitigated its exposures associated with the contingent liabilities related to the divested gas marketing operations by obtaining from a subsidiary of Mirant Corporation (Mirant) certain remaining contracts in June and July 2003, and simultaneously hedging the market price exposures of these contracts. The company remains contingently liable for certain residual obligations. At September 30, 2003, TransCanada reviewed the provision for loss on discontinued operations and the deferred gain, taking into consideration the impacts of Mirant's filing for bankruptcy protection in July 2003 and the mitigation of the contingent liabilities referred to above. As a result of this review, $50 million of the original approximately $100 million after-tax deferred gain was recognized in income in third quarter 2003. In addition, TransCanada concluded that the remaining provision was adequate, and the deferral of the remaining approximately $50 million of deferred after-tax gains related to the Gas Marketing business was appropriate. Net income from discontinued operations was $50 million, net of $29 million in taxes, for the three and nine months ended September 30, 2003 compared to nil for the same periods in 2002. The provision for loss on discontinued operations at September 30, 2003 was $168 million (December 31, 2002 - $234 million). The net assets of discontinued operations included in the consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. at September 30, 2003 were $94 million (December 31, 2002 - $90 million). 8. Investment in Bruce Power L.P. On February 14, 2003, TransCanada acquired a 31.6 per cent interest in Bruce Power L.P. (Bruce Power) for approximately $409 million, including closing adjustments. As part of the acquisition, TransCanada also funded a one-third share ($75 million) of a $225 million accelerated deferred rent payment to Ontario Power Generation Ontario Power Generation (OPG) is a public company whose shares are wholly owned by the Government of Ontario. It is responsible for approximately 70% of the electricity generation in the province of Ontario, Canada [1]. , which is recorded in Other Assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. . The purchase price of TransCanada's 31.6 per cent interest in Bruce Power has been allocated as follows.
Purchase Price Allocation
(unaudited)
(millions of dollars)
---------------------------------------------------------------------
Net book value of assets acquired 281
Valuation of Bruce Power sales agreements (131)
Excess of fair value over book value of
other net assets acquired 259
---------------------------------------------------------------------
409
---------------------------------------------------------------------
---------------------------------------------------------------------
The amount allocated to the investment in Bruce Power includes an excess purchase price of approximately $259 million over TransCanada's share of the book value of the underlying net assets, other than the Bruce Power sales agreements. This amount will be primarily assigned to the capital lease of the Bruce plant and will be amortized on a straight-line straight-line adj. 1. Lying in a straight line. 2. Relating to a device whose linkage produces or copies motion in straight lines. 3. basis over the lease term which extends to 2018, resulting in an annual amortization expense of approximately $16 million. The value, being $131 million, allocated to the Bruce Power sales agreements will be amortized to income over the remaining term of the underlying sales contracts. The approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. amount of income relating to the amortization of the fair value allocated to these contracts is: 2003 - $38 million; 2004 - $37 million; 2005 - $25 million; 2006 - $29 million; and 2007 - $2 million. The investment in Bruce Power L.P. is recorded in Long-Term Investments. 9. Commitment On June 18, 2003, an agreement was reached among the Mackenzie Mackenzie, river, c.1,120 mi (1,800 km) long, issuing from Great Slave Lake, Northwest Territories, Canada, and flowing generally NW to the Arctic Ocean through a great delta. Between Great Slave Lake and Lake Athabasca it is known as the Slave River. Delta gas producers, the Aboriginal PipeLine Group (APG APG Assists Per Game (basketball) APG Assists Per Game (hockey statistic) APG Aberdeen Proving Ground APG Automated Password Generator APG Asia Pacific Group on Money Laundering ) and TransCanada which governs TransCanada's role in the Mackenzie Gas Pipeline Project. The Mackenzie Gas Pipeline Project would result in a natural gas pipeline being constructed from Inuvik, Northwest Territories Inuvik, (place of man), is a town in the Northwest Territories of Canada and is the administrative centre for the Inuvik Region. The population as of the 2006 Census was 3,484[1] to the northern border of Alberta, where it would then connect with the Alberta System. Under the agreement, TransCanada has agreed to finance the APG for its one-third share of project definition phase costs; this share is estimated to be $80 million over three years. If the pipeline is approved and becomes operational, this loan will be repaid from APG's share of pipeline revenues. Supplementary Information As at September 30, 2003, TransCanada had 482,353,304 issued and outstanding common shares. In addition, there were 11,202,041 outstanding options to purchase common shares, of which 8,417,860 were exercisable as at September 30, 2003. TransCanada welcomes questions from shareholders and potential investors. Please telephone: Investor Relations Investor relations The process by which the corporation communicates with its investors. , at 1-800-361-6522 (Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of and U.S. Mainland Mainland. 1 Island (1991 pop. 14,150), 178 sq mi (461 sq km), N Scotland. The largest of the Orkney Islands, it is also called Pomona. Kirkwall, the seat of the Orkney Islands council area, is on the island. ) or direct dial David Moneta/Debbie Stein Stein , William Howard 1911-1980. American biochemist. He shared a 1972 Nobel Prize for pioneering studies of ribonuclease. at (403) 920-7911. The investor fax line is (403) 920-2457. Media Relations: Glenn Herchak/Hejdi Feick at (403) 920-7877. Visit TransCanada's Internet site at: http://www.transcanada.com. |
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