TransCanada Reports Another Year of Strong Performance; Board Raises Dividend; Quarterly Dividend Increased to $0.29 Per Share.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)--Jan. 27, 2004 Fourth Quarter and Year-End year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 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:
quarterly dividend on the company's common shares from $0.27 per share to $0.29 per share, an increase of seven per cent, for the quarter ending March 31, 2004. This is the 161st consecutive quarterly dividend on TransCanada's common shares paid by TransCanada and its subsidiary. It is payable on April 30, 2004 to shareholders of record at the close of business on March 31, 2004. -- TransCanada's net income for the fourth quarter 2003 was $193 million or $0.40 per share, an increase of $13 million or $0.03 per share compared to $180 million or $0.37 per share for the fourth quarter 2002. This increase is primarily due to increased net earnings from the Power business. -- For the year ended December December: see month. 31, 2003, TransCanada's net income was $851 million or $1.76 per share. This compares to $747 million or $1.56 per share for 2002. Included in 2003 was 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. of $50 million or $0.10 per share reflecting the third quarter 2003 income recognition of a portion 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 year ended December 31, 2003 was $801 million or $1.66 per share compared to $747 million or $1.56 per share in 2002. The increase of $54 million or $0.10 per share 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 Gas Transmission business. -- Funds generated from continuing operations for the fourth quarter 2003, were $403 million, a decrease of $64 million compared to fourth quarter 2002. Funds generated from continuing operations for the year ended December 31, 2003 were $1,810 million, a decrease of $17 million compared to 2002. "It's it's 1. Contraction of it is. 2. Contraction of it has. See Usage Note at its. it's it is or it has it's be ~have been a solid year for TransCanada," said Hal Kvisle, TransCanada's chief executive officer. "We've we've Contraction of we have. we've have delivered healthy operating and financial performance, and our balance sheet remains strong. As a result of our increased earnings and the strength of our cash flow -- and recognizing the importance of the dividend to our shareholders -- the Board has increased the dividend on our common shares for the fourth consecutive year." "Over the course of the year, we've invested more than $1.2 billion, including the assumption of debt, in our natural gas transmission and power businesses. This includes our purchase of a 31.6 per cent interest 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. , a low cost power producer in one of the highest demand markets 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. . We continued to grow our gas transmission business through the purchase of additional interests in the Foothills and 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. pipelines, and longer term, we remain focused on strengthening our ability to tap into new sources of natural gas supply. To that end, we made good progress on the development of new pipelines to connect northern gas and new receiving terminals to bring 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. to North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. markets. "On the 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. front, we're we're Contraction of we are. we're we are in for another busy year. The outcome of regulatory proceedings could have a significant impact on results from the 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 and 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 mainline Drug slang verb To inject a drug in 2004. We were encouraged by the National Energy Board's July July: see month. 2003 decision on our Mainline tolls application, but we remain concerned about the regulators' assessment of business risk inherent in our Mainline and Alberta systems and the resulting low returns on equity and deemed equity thicknesses. We look forward to continuing the dialogue with regulators and our customers in 2004. "Over the year ahead, we will continue to focus on our core strategies with the same emphasis on disciplined, prudent execution that has contributed to our success. We have a skilled, dedicated team of people at TransCanada, and it's as a result of their efforts that we've established a track record of strong performance over the past four years. We remain well-positioned to capture opportunities that create significant value for our shareholders over the long term," said Mr. Kvisle. Fourth Quarter 2003 Developments Gas Transmission Increased Interest in Portland On December 3, 2003, TransCanada increased its ownership interest in Portland Natural Gas Transmission System Partnership (Portland) from 43.4 per cent to 61.7 per cent. TransCanada acquired the additional interest from 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 for US$82 million including US$50 million of assumed debt. "The Portland pipeline is essentially an extension of our Mainline System into the Boston Boston, town, England Boston, town (1991 pop. 26,495), E central England, on the Witham River. Boston's fame as a port dates from the 13th cent., when it was a Hanseatic port trading wool and wine. Having recovered from a decline in the 18th and 19th cent. regional market," said Mr. Kvisle. "Our increased stake in Portland further bolsters our role as an energy supplier to the US 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. ." Western Alberta System Pipeline Incidents On December 1 and December 2, 2003 two natural gas pipeline failures occurred on TransCanada's Alberta System. TransCanada immediately activated activated a state of being more than usually active. In biological systems this is usually brought about by chemical or electrical means. Commonly said of pharmaceutical and chemical products. its emergency response plan to isolate isolate /iso·late/ (i´sah-lat) 1. to separate from others. 2. a group of individuals prevented by geographic, genetic, ecologic, social, or artificial barriers from interbreeding with others of their kind. damaged sections of pipeline. No one was injured in·jure tr.v. in·jured, in·jur·ing, in·jures 1. To cause physical harm to; hurt. 2. To cause damage to; impair. 3. and both sites were returned to operation within days. Deliveries of gas to local communities were not impacted as a result of either incident. Following preliminary investigations into the causes of the two pipeline failures, TransCanada found evidence of external corrosion on the pipeline. "The findings from the investigation will be used to improve future integrity work," said Mr. Kvisle. "Safety of the public, employees and the environment is a top priority at TransCanada." Power 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. Project TransCanada began construction of the Grandview cogeneration facility in December 2003 following the announcement of an agreement between TransCanada and Grandview Cogeneration 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. ), in October October: see month. to build the plant. The 90 megawatt meg·a·watt n. Abbr. MW One million watts. meg  a·watt (MW) natural gas-fired gas-fired adj → de gasgas-fired adj → au gaz gas-fired adj (heater etc) → Gas- cogeneration power plant will be located 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. . The plant is expected to be in-service in-service In-service training adjective Referring to any form of on-the-job training noun In-service training of an employee by the end of 2004. "The Grandview project is an excellent example of how TransCanada is growing its power business through new developments in niche markets A niche market also known as a target market is a focused, targetable portion (subset) of a market sector. By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. , capitalizing on our expertise in fuel efficient cogeneration," said Mr. Kvisle. Bruce Power Restarts 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. A Unit 4 began producing power to the 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. power 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. on October 7, 2003 and achieved commercial production effective November November: see month. 1, 2003. Bruce A Unit 3 was synchronized syn·chro·nize v. syn·chro·nized, syn·chro·niz·ing, syn·chro·niz·es v.intr. 1. To occur at the same time; be simultaneous. 2. To operate in unison. v.tr. 1. to the grid on January January: see month. 8, 2004. Similar to the Unit 4 startup (STARTing UP) "At startup" means when the computer is first turned on or when a program is first loaded. See Startup folder. process, 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, Unit 3 is expected to reconnect to the grid and begin ramping up to full power. Units 3 and 4 together will have a capacity of 1,500 MW of electricity bringing Bruce Power's total capacity to approximately 4,660 MW. "The Bruce facility is a high quality asset. The restarts of Bruce A Units 3 and 4 took a tremendous amount of work and we applaud the Bruce team on their efforts related to this complex project," said Mr. Kvisle. "Bruce made a significant contribution to TransCanada's earnings in 2003, and we're very pleased with its performance to date." Regulatory Developments Alberta System In December 2003, the Alberta Energy and Utilities Board (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 ) approved TransCanada's November 28, 2003 application for interim tolls for 2004 on the Alberta System. Tolls will be finalized See finalization. when decisions from the 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 (GCOC) hearing and the hearings on both phases of the 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 ) have been received. In the GCOC application, filed in July 2003, TransCanada has requested a return on equity of 11 per cent with a deemed common equity of 40 per cent. 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 at the conclusion of this proceeding. Oral testimony Oral evidence offered by a competent witness under oath, which is used to establish some fact or set of facts. Testimony is distinguishable from evidence that is acquired through the use of written sources, such as documents. testimony n. in the hearing concluded January 16, 2004. In the first phase of its 2004 GRA, TransCanada has applied for an increase in the composite composite, alternate common name for Asteraceae or Compositae, the aster family. composite - aggregate depreciation rate of 4.13 per cent compared to the current depreciation rate of 4.00 per cent. The GRA Phase I hearing is scheduled to begin April 1, 2004. The Phase II hearing, dealing primarily with rate design and services, is set to commence June June: see month. 1, 2004. Canadian Mainline In July 2003, the National Energy Board (NEB) issued its decision on TransCanada's 2003 Mainline Tolls Application. In this decision, the NEB approved all key components of the application. 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 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. The Federal Court of Appeal is expected to hear TransCanada's appeal of the NEB's Review and Variance decision commencing February February: see month. 16, 2004. The company's 2004 Tolls and Tariff Application for the Canadian Mainline was filed January 26, 2004 and includes a request for an 11 per cent return on a 40 per cent deemed common equity component. 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 fourth 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, February 3 by dialing 1-800-408-3053 or 416-695-5800 (Toronto area) and entering pass code 1520354. 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 39,000 kilometres (24,200 miles) of wholly owned 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 generation - 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. 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: Hejdi Feick/Anita Perry at (403) 920-7859. Visit TransCanada's Internet site at: http://www.transcanada.com
Fourth Quarter 2003 Financial Highlights
(unaudited)
Three months Year
ended ended
Operating Results December 31 December 31
(millions of dollars) 2003 2002 2003 2002
------------------------------------------------- ----- ----- -----
Revenues 1,319 1,338 5,357 5,214
Net Income
Continuing operations 193 180 801 747
Discontinued operations - - 50 -
----- ----- ----- -----
193 180 851 747
----- ----- ----- -----
----- ----- ----- -----
Cash Flows
Funds generated from continuing operations 403 467 1,810 1,827
Capital expenditures 127 202 391 599
Acquisitions, net of cash acquired 23 209 570 228
Three months Year
ended ended
December 31 December 31
Common Share Statistics 2003 2002 2003 2002
------------------------------------------------- ----- ----- -----
Net Income Per Share - Basic
Continuing operations $0.40 $0.37 $1.66 $1.56
Discontinued operations - - 0.10 -
----- ----- ----- -----
$0.40 $0.37 $1.76 $1.56
----- ----- ----- -----
----- ----- ----- -----
Dividends Per Share $0.27 $0.25 $1.08 $1.00
Common Shares Outstanding (millions)
Average for the period 482.8 479.3 481.5 478.3
End of period 483.2 479.5 483.2 479.5
---------------------------------------------------------------------
---------------------------------------------------------------------
TRANSCANADA CORPORATION
FOURTH QUARTER 2003
Quarterly Report to Shareholders
Consolidated Results-at-a-Glance
Three months Year
(unaudited) ended ended
(millions of dollars except December 31 December 31
per share amounts) 2003 2002 2003 2002
----------------------------------------------- ----- ----- -----
Net Income
Continuing operations 193 180 801 747
Discontinued operations - - 50 -
----- ----- ----- -----
193 180 851 747
----- ----- ----- -----
----- ----- ----- -----
Net Income Per Share - Basic
Continuing operations $0.40 $0.37 $1.66 $1.56
Discontinued operations - - 0.10 -
----- ----- ----- -----
$0.40 $0.37 $1.76 $1.56
----- ----- ----- -----
----- ----- ----- -----
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 On January 27, 2004, the Board of Directors of TransCanada Corporation (TransCanada or the company) raised the quarterly dividend on the company's common shares from $0.27 per share to $0.29 per share, an increase of seven per cent, for the quarter ending March 31, 2004. 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 for the year ended December 31, 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 from continuing operations (net earnings) and net income for fourth quarter 2003 were $193 million or $0.40 per share compared to $180 million or $0.37 per share for fourth quarter 2002. The increase of $13 million or $0.03 per share was primarily due to higher earnings from the Power business. Higher net earnings from the Power business included $7 million after tax from TransCanada's investment in Bruce Power L.P. (Bruce Power) and lower general, administrative and support costs. TransCanada's net income for the year ended December 31, 2003 was $851 million or $1.76 per share compared to $747 million or $1.56 per share for the comparable period in 2002. Included in 2003 was net income from discontinued operations of $50 million or $0.10 per share reflecting the third quarter 2003 income recognition of a portion of the initially deferred gain of approximately $100 million after tax relating to the 2001 disposition of the company's Gas Marketing business. TransCanada's net earnings for the year ended December 31, 2003 were $801 million or $1.66 per share compared to $747 million or $1.56 per share for the comparable period in 2002. The increase of $54 million or $0.10 per share in 2003 compared to 2002 was primarily due to higher net earnings of $74 million from the Power business and lower net expenses in the Corporate segment, partially offset by lower net earnings from the Gas Transmission business. Net earnings from the Power business for the year ended December 31, 2003 included $73 million after tax from TransCanada's investment in Bruce Power which was acquired in February 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 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 were partially offset by reduced operating and other income from 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. U.S. Operations, combined with higher general, administrative and support costs. The $11 million decrease in 2003 net expenses in the Corporate segment was primarily due to the positive impacts of a weaker U.S. dollar in 2003 compared to 2002. The lower net earnings of $31 million in the Gas Transmission business for the year ended December 31, 2003 compared to 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 Stakeholders All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government. 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 year ended December 31, 2002 included after-tax income of $16 million representing the impact of the Fair Return decision for 2001. The 2003 results for the Gas Transmission segment included 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
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.
Segment Results-at-a-Glance
Three months Year
ended ended
(unaudited) December 31 December 31
(millions of dollars) 2003 2002 2003 2002
----------------------------------------------- ----- ----- -----
Gas Transmission 160 162 622 653
Power 44 30 220 146
Corporate (11) (12) (41) (52)
----- ----- ----- -----
Continuing operations 193 180 801 747
Discontinued operations - - 50 -
----- ----- ----- -----
Net Income 193 180 851 747
----- ----- ----- -----
----- ----- ----- -----
Funds generated from continuing operations of $403 million for fourth quarter 2003 decreased $64 million compared to fourth quarter 2002. Funds generated from continuing operations of $1,810 million for the year ended December 31, 2003 decreased $17 million compared to last year. Gas Transmission The Gas Transmission business generated net earnings of $160 million and $622 million for the quarter and year ended December 31, 2003, respectively, compared to $162 million and $653 million for the same periods in 2002.
Gas Transmission Results-at-a-Glance
Three months Year
ended ended
(unaudited) December 31 December 31
(millions of dollars) 2003 2002 2003 2002
----------------------------------------------- ----- ----- -----
Wholly-Owned Pipelines
Alberta System 54 56 190 214
Canadian Mainline 75 75 290 307
Foothills(a) 6 4 20 17
BC System 2 2 6 6
----- ----- ----- -----
137 137 506 544
----- ----- ----- -----
Other Gas Transmission
Great Lakes 14 17 52 66
Iroquois 3 3 18 18
TC PipeLines, LP 4 5 15 17
Portland(b) 4 - 11 2
Ventures, LP 3 2 10 7
Trans Quebec & Maritimes 2 2 8 8
CrossAlta 2 4 6 13
TransGas de Occidente 2 1 22 6
Northern Development (2) (1) (4) (6)
General, administrative, support and other (9) (8) (22) (22)
----- ----- ----- -----
23 25 116 109
----- ----- ----- -----
Net earnings 160 162 622 653
----- ----- ----- -----
----- ----- ----- -----
(a) The remaining ownership interests in Foothills, previously not held by TransCanada, were acquired on August 15, 2003. (b) TransCanada increased its ownership interest in Portland from 33.3 per cent to 43.4 per cent on September September: see month. 29, 2003 and from 43.4 per cent to 61.7 per cent on December 3, 2003. Wholly-Owned Pipelines The Alberta System's net earnings of $54 million in fourth quarter 2003 decreased $2 million compared to $56 million in the same quarter of 2002. Net earnings for the year ended December 31, 2003 decreased $24 million compared to the prior year. This 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. As discussed in the third quarter 2003 Quarterly Report to Shareholders, the lower negotiated 2003 revenue requirement was expected to reduce 2003 earnings by approximately $30 million relative to 2002 earnings of $214 million. However, lower financing and operating costs operating costs npl → gastos mpl operacionales partially offset the previously anticipated reduction in earnings. The Canadian Mainline's fourth quarter net earnings of $75 million are consistent with net earnings in the same quarter of 2002. The 2003 net earnings of $290 million are $17 million lower than 2002 net earnings due to the impact of the NEB's Fair Return decision in 2002. This decision included an increase in the deemed common equity ratio from 30 to 33 per cent effective January 1, 2001 and resulted in additional net earnings of $16 million for the year ended December 31, 2001, recognized in June 2002. The impact of a lower average investment base was substantially offset by an increase in the approved rate of return on common equity from 9.53 per cent in 2002 to 9.79 per cent in 2003. In December 2002, the NEB approved TransCanada's application to charge interim tolls for transportation service, effective January 1, 2003. In August 2003, subsequent to the NEB's decision on the 2003 Tolls and Tariff Application, it approved interim tolls that the company charged from September 1, 2003 to December 31, 2003. The NEB ordered that tolls will remain interim pending a decision from the Federal Court of Appeal on TransCanada's appeal of the NEB's decision on TransCanada's Fair Return Review and Variance Application, which is expected to be heard commencing February 16, 2004.
Operating Statistics
Year ended December 31
Alberta Canadian BC
(unaudited) System(a) Mainline(b) Foothills(c) System
----------------------- ---------- ----------- ------------ ---------
2003 2002 2003 2002 2003 2002 2003 2002
---------- ----------- ------------ ---------
Average investment base
($ millions) 4,878 5,074 8,565 8,884 739 (c) 236 211
Delivery volumes (Bcf)
Total 3,883 4,146 2,628 2,630 1,110 (c) 325 371
Average per day 10.6 11.4 7.2 7.2 3.0 (c) 0.9 1.0
---------------------------------------------------------------------
(a) Field receipt volumes for the Alberta System for the year ended December 31, 2003 were 3,892 Bcf (2002 - 4,101 Bcf); average per day was 10.7 Bcf (2002 - 11.2 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 year ended December 31, 2003 were 2,055 Bcf (2002 - 2,221 Bcf); average per day was 5.6 Bcf (2002 - 6.1 Bcf). (c) The remaining interests in Foothills were acquired in August 2003. The annual 2003 delivery volumes in the table represent 100 per cent of Foothills. Other Gas Transmission TransCanada'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 net earnings from Other Gas Transmission was $23 million and $116 million for the quarter and year ended December 31, 2003, respectively. Net earnings for fourth quarter 2003 were slightly lower than the same quarter in 2002. Higher contributions from Portland, Ventures LP and TransGas were more than offset by lower earnings from CrossAlta, higher project development costs, and the impact of a weaker U.S. dollar. The 2002 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 2003 increased $14 million compared to 2002. Earnings from TransGas were $16 million higher as a result of higher contractual tolls and the recognition of future tax benefits in 2003. TransCanada's share of Portland's net earnings in 2003 has increased $9 million compared to last year primarily due to the impacts of a rate settlement in early 2003 and TransCanada's increased ownership interest in 2003. These increases were partially offset by a weaker U.S. dollar and lower earnings from CrossAlta due to reduced storage margins as a result of unfavourable market conditions. On December 3, 2003, TransCanada increased its ownership interest in Portland Natural Gas Transmission System Partnership (Portland) from 43.4 per cent to 61.7 per cent. The company acquired the additional interest from El Paso Corporation for US$82 million, including US$50 million of assumed debt.
Power
Power Results-at-a-Glance
Three months Year
ended ended
(unaudited) December 31 December 31
(millions of dollars) 2003 2002 2003 2002
-------------------------------------------------- ----- ----- -----
Western operations 31 30 160 131
Northeastern U.S. operations 36 35 127 149
Bruce Power L.P. investment 7 - 99 -
Power LP investment 9 9 35 36
General, administrative and support costs (20) (25) (86) (73)
----- ----- ----- -----
Operating and other income 63 49 335 243
Financial charges (4) (4) (12) (13)
Income taxes (15) (15) (103) (84)
----- ----- ----- -----
Net earnings 44 30 220 146
----- ----- ----- -----
----- ----- ----- -----
Power's net earnings in fourth quarter 2003 of $44 million increased $14 million compared to $30 million in fourth quarter 2002. Earnings from the February 2003 acquisition of the 31.6 per cent interest in Bruce Power and reduced general, administrative and support costs were the primary reasons for the increase. Net earnings for the year ended December 31, 2003 of $220 million were $74 million higher compared to the prior year. Bruce Power earnings, a second quarter 2003 settlement 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 for fourth quarter 2003 in Western Operations of $31 million was comparable to fourth quarter 2002. Higher contributions from 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. power purchase arrangements reflecting lower transmission costs were partially offset by the unfavourable effects in fourth quarter 2003 of lower prices achieved on the overall sale of power. Operating and other income for the year ended December 31, 2003 in Western Operations of $160 million was $29 million higher compared to the prior year, 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. A full year of earnings from the ManChief plant, acquired in late 2002, and higher contributions from the Sundance power purchase arrangements reflecting lower transmission costs 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 the higher cost of natural gas fuel at the carbon black facility. Northeastern U.S. Operations Operating and other income for fourth quarter 2003 in Northeastern U.S. Operations of $36 million increased marginally mar·gin·al adj. 1. Of, relating to, located at, or constituting a margin, a border, or an edge: the marginal strip of beach; a marginal issue that had no bearing on the election results. 2. compared to fourth quarter 2002. Increased water flows through the Curtis Palmer palmer: see pilgrim. hydroelectric facility and earnings from the Cobourg Co´bourg n. 1. A thin worsted fabric for women's dresses. temporary generation facility were partially offset by the unfavourable impact of a weaker U.S. dollar and higher natural gas fuel cost 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. Operating and other income for the year ended December 31, 2003 in Northeastern U.S. Operations of $127 million decreased $22 million compared to 2002 primarily due to the impact of higher operating costs at OSP and the unfavourable impact of a weaker U.S. dollar. Partially offsetting these decreases were incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. earnings from the growth in volumes and margins in the Northeastern U.S. retail business with large commercial and industrial customers. 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. gas supply for OSP is subject to a yearly price renegotiation, taking effect after the tenth Tenth can mean: In mathematics:
Bruce Power L.P. Investment
Bruce Power Results-at-a-Glance Three months Year
ended ended
(unaudited) December 31, December 31,
(millions of dollars) 2003 2003
------------------------------------------------------- ------------
Bruce Power (100 per cent basis)
Revenues 269 1,208
Operating expenses 254 853
----------- ------------
Operating income 15 355
Financial charges 20 69
----------- ------------
(Loss)/Income before income taxes (5) 286
----------- ------------
----------- ------------
TransCanada's interest in Bruce Power
(loss)/income before income taxes(a) (1) 65
Adjustments (b) 8 34
----------- ------------
TransCanada's income from Bruce Power
before income taxes 7 99
----------- ------------
----------- ------------
(a) TransCanada acquired its interest in Bruce Power on February 14, 2003. Bruce Power's 100 per cent income before income taxes from February 14, 2003 to December 31, 2003 was $205 million. (b) See Note 8 to the December 31, 2003 financial statements for an explanation of the amounts included in Adjustments. Bruce Power contributed $7 million of pre-tax equity income in fourth quarter 2003 compared to $38 million in third quarter 2003. The decrease reflected lower power output and higher maintenance costs compared to third quarter 2003, primarily due to a 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. at one of the Bruce B units for the entire fourth quarter 2003. Overall prices achieved during fourth quarter 2003 were approximately $45 per megawatt hour (MWh) which is consistent with third quarter 2003. The average price achieved for the year ended December 31, 2003 was approximately $48 per MWh. Approximately 30 per cent of the output was sold into Ontario's wholesale spot market in fourth quarter 2003 with the remainder being sold under longer term contracts. TransCanada's share of power output for fourth quarter 2003 from four Bruce B units and one Bruce A unit was 1,846 gigawatt gig·a·watt n. Abbr. GW One billion (109) watts. hours (GWh) compared to 2,041 GWh in third quarter 2003. This includes power output from Bruce A Unit 4 from November 1, 2003 to December 31, 2003 of approximately 275 GWh. Bruce A Unit 4 began producing electricity to the Ontario electricity grid on October 7, 2003 and was considered commercially in-service November 1, 2003. Bruce B Unit 8 was offline (1) Not connected to the Internet, online service or internal network. See offline file. (2) Not connected to or not installed in the computer. If a terminal, printer or other device is physically connected to the computer, but is not turned on or in ready mode, it is for the entire fourth quarter for maintenance. As well, Bruce B Unit 7 incurred a week long forced outage in the fourth quarter. The Bruce units ran at an average availability of 73 per cent in the fourth quarter. The average availability during TransCanada's period of ownership ending December 31, 2003 was 83 per cent. Bruce A Unit 3 reconnected to the Ontario electricity grid on January 8, 2004. Similar to the Bruce A Unit 4 startup process, after performing and evaluating tests of the shutdown system, Bruce A Unit 3 is expected to reconnect to the grid and begin ramping up to full power. Bruce Power's cumulative restart To resume computer operation after a planned or unplanned termination. See boot, warm boot and checkpoint/restart. cost for the two Bruce A units was approximately $720 million. Bruce Power incurred approximately $300 million on the two unit restart program for the period Februaury 14, 2003 to December 31, 2003, of which approximately $32 million was incurred in fourth quarter 2003. TransCanada did not provide any funding to Bruce Power subsequent to the acquisition of its ownership interest in February 2003. The two Bruce A units add 1,500 megawatts (MW) of capacity bringing Bruce Power's total capacity to 4,660 MW. Bruce Power spent approximately $147 million on capital expenditures at Bruce B for the period February 14, 2003 to December 31, 2003, the majority of which was for safety systems and power uprate programs. In 2004, Bruce Power's capital expenditure program for the two Bruce A and four Bruce B reactors is expected to total approximately $400 million. 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. 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 1,560 MW of output for 2004. The average availability in 2004 for the six Bruce units is expected to be 80 per cent compared to 85 per cent for the year ended December 31, 2003. This decrease reflects planned maintenance outages for two Bruce B and two Bruce A units and a test of the Bruce B vacuum vacuum, theoretically, space without matter in it. A perfect vacuum has never been obtained; the best man-made vacuums contain less than 100,000 gas molecules per cc, compared to about 30 billion billion (30×1018) molecules for air at sea level. building expected in the fall, which will require all four Bruce B units to be taken offline for approximately one month. There is a planned maintenance outage at one of the Bruce A units for approximately one month, towards the end of first quarter 2004. Power LP Investment Operating and other income of $9 million and $35 million for the three and twelve months ended December 31, 2003, was consistent with the same periods in 2002. General, Administrative and Support Costs General, administrative and support costs for fourth quarter 2003 of $20 million were $5 million lower compared to fourth quarter 2002. The decrease is primarily due to lower business development costs in fourth quarter 2003. General, administrative and support costs for the year ended December 31, 2003 increased $13 million compared to the prior year, mainly reflecting higher support costs as part of the company's continued investment in Power.
Power Sales Volumes
Three months Year
ended ended
(unaudited) December 31 December 31
(GWh) 2003 2002 2003 2002
--------------------------------------- ------------ --------------
Western operations(a) 2,972 2,864 12,296 12,065
Northeastern U.S. operations 1,794 1,513 6,906 5,630
Bruce Power L.P. investment (b) 1,846 n/a 6,655 n/a
Power LP investment 549 637 2,153 2,416
----- ----- ------ ------
Total 7,161 5,014 28,010 20,111
---------------------------------------------------- --------------
---------------------------------------------------- --------------
(a) Sales volumes include TransCanada's share of the Sundance B power purchase arrangement (50 per cent). (b) Acquired in February 2003. Sales volumes reflect TransCanada's share of Bruce Power output (31.6 per cent) for the period February 14, 2003 to December 31, 2003.
Weighted Average Plant Availability(a) Three months Year
ended ended
December 31 December 31
(unaudited) 2003 2002 2003 2002
------------------------------------------ ----------- ------------
Western operations 94% 99% 93% 99%
Northeastern U.S. operations 99% 82% 94% 95%
Bruce Power L.P. investment (b) 73% n/a 83% n/a
Power LP investment 98% 98% 96% 94%
All plants 89% 92% 90% 96%
------------------------------------------------------ ------------
------------------------------------------------------ ------------
(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 December 31, 2003. Corporate Net expenses were $11 million and $12 million for the three months ended December 31, 2003 and 2002, respectively. Net expenses were $41 million for the year ended December 31, 2003 compared to $52 million for 2002. The $11 million decrease in net expenses for 2003 is primarily due to the positive impacts of a weaker U.S. dollar compared to the prior year. These positive impacts substantially offset the negative impacts of a weaker U.S. dollar reflected in the other segments. Discontinued Operations The company's exit from the Gas Marketing business was substantially completed by December 31, 2001. In third quarter 2003, $50 million of the original approximately $100 million after-tax deferred gain related to Gas Marketing was recognized in income. At December 31, 2003, TransCanada reviewed the provision for loss on discontinued operations and the deferred gain and 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 gain related to the Gas Marketing business was appropriate. TransCanada's investments in Gasoducto del Pacifico Pa`ci´fi`co n. 1. A peaceful person; - applied specif. by the Spaniards to the natives in Cuba and the Philippine Islands who did not oppose the Spanish arms. , INNERGY Holdings S.A. and P.T. Paiton Energy Company, which were approved for disposal under a plan in December 1999, will be accounted for as part of continuing operations as of December 31, 2003 due to the length of time it has taken the company 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 these assets. It is the intention of the company to continue with the plan to dispose of these investments. Liquidity and Capital Resources Funds Generated from Operations Funds generated from continuing operations were $403 million and $1,810 million for the three and twelve months ended December 31, 2003, respectively, compared with $467 million and $1,827 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 months and year ended December 31, 2003, capital expenditures, excluding acquisitions, totalled $127 million (2002 - $202 million) and $391 million (2002 - $599 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 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 year ended December 31, 2003 totalled $570 million (2002 - $228 million) and were primarily comprised of: -- in fourth quarter 2003, the increase in interest in Portland from 43.4 per cent to 61.7 per cent for approximately US$32 million, -- in third quarter 2003, the increase in interest in Portland from 33.3 per cent to 43.4 per cent for approximately US$19 million, -- in third quarter 2003, the acquisition of the remaining interests in Foothills for approximately $105 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 and US$78 million of debt on the Foothills and Portland acquisitions, respectively. Financing Activities TransCanada used a portion of its cash resources to retire retire v. 1) to stop working at one's occupation. 2) to pay off a promissory note, and thus "retire" the loan. 3) for a jury to go into the jury room to decide on a verdict after all evidence, argument and jury instructions have been completed. 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. of $358 million and $744 million in the quarter and year ended December 31, 2003, respectively. In November 2003, the company issued $450 million of ten year notes bearing interest at 5.65 per cent and in June 2003, the company issued US$350 million of ten year notes bearing interest at 4.00 per cent. For the year ended December 31, 2003, outstanding notes payable decreased by $62 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 increased by $126 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 January 27, 2004, TransCanada's Board of Directors 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 $0.29 per share for the quarter ending March 31, 2004 on the outstanding common shares. This is the 161st consecutive quarterly dividend paid by TransCanada and its subsidiary on the common shares. It is payable on April 30, 2004 to shareholders of record at the close of business on March 31, 2004. 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 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 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 In 2004, the outcome of regulatory proceedings could have a significant impact on the expected results for the Alberta System and Canadian Mainline. Plant availability and fluctuating fluc·tu·ate v. fluc·tu·at·ed, fluc·tu·at·ing, fluc·tu·ates v.intr. 1. To vary irregularly. See Synonyms at swing. 2. To rise and fall in or as if in waves; undulate. v. power prices could have a significant impact on Power results. Excluding these impacts as well as the settlement with a former counterparty in 2003 and the recognition of the TransGas future tax benefits in 2003, the outlook for the company is 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 Gas Transmission and Power. The strengthening of the Canadian dollar compared to the U.S. dollar in 2003 has not significantly impacted TransCanada's consolidated financial results in 2003 and is not expected to have a significant impact in 2004. 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 Gas Transmission Wholly-Owned Pipelines Alberta System In July 2003, TransCanada, along with other utilities, filed evidence in the Generic Cost of Capital (GCOC) Proceeding with the Alberta Energy and Utilities Board (EUB). TransCanada has requested a return on equity of 11 per cent based on a deemed common equity of 40 per cent in its GCOC 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. The oral portion of the hearing was completed on January 16, 2004 with written arguments to follow. In September 2003, TransCanada filed Phase I of the 2004 General Rate Application (GRA) with the EUB, consisting of evidence in support of the applied for rate base and revenue requirement. The company applied for a composite depreciation rate of 4.13 per cent compared to the current depreciation rate of 4.00 per cent. Phase II of the application, dealing primarily with rate design and services, was filed in December 2003. EUB hearings to consider the 2004 GRA Phase I and Phase II applications are scheduled to commence, in Calgary, on April 1, 2004 and June 1, 2004, respectively. In December 2003, the EUB approved TransCanada's application to charge interim tolls for transportation service, effective January 1, 2004. Final tolls for 2004 will be determined based on the EUB decisions for the GCOC hearing and both phases of the GRA. On December 1 and 2, 2003, two natural gas pipeline failures occurred on the Alberta System. Deliveries of gas to local communities were not impacted as a result of either incident. Following preliminary investigations into the causes of the two pipeline ruptures, TransCanada found evidence of external corrosion on the pipeline. No one was injured and the impacted segment of the Alberta System was repaired within days. The incidents are not expected to have an impact on the company's earnings. Canadian Mainline In July 2003, TransCanada filed a notice of appeal with the Federal Court of Appeal and served notice of appeal on parties to the NEB proceeding on TransCanada's Fair Return Review and Variance Application. In September 2003, TransCanada filed a Memorandum An informal record, in the form of a brief written note or outline, of a particular legal transaction or document for the purpose of aiding the parties in remembering particular points or for future reference. of Fact and Law with the Federal Court of Appeal, and in October 2003 all interested parties filed their memoranda in response to TransCanada's filing. The case will be heard in an oral hearing scheduled to commence February 16, 2004. In December 2003, the NEB approved interim tolls effective January 1, 2004 for the Canadian Mainline. The 2004 Tolls and Tariff Application for the Canadian Mainline was filed on January 26, 2004 and includes a request for an 11 per cent return on a 40 per cent deemed common equity component. Other Gas Transmission 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. Iroquois continues to make progress on the construction of the Eastchester expansion project and is expected to place the expansion facilities into service in February 2004. Northern Development For 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. Gas Pipeline Project, TransCanada has agreed to finance 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 ) for its one-third share of project definition phase costs which is estimated to be approximately $90 million over three years. In the year ended December 31, 2003, TransCanada funded $34 million which is included 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. . Regulatory applications for the Mackenzie Gas Pipeline Project have been delayed and are expected to be filed mid- mid- pref. Middle: midbrain. 2004. Liquefied Natural Gas In September 2003, TransCanada and 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 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 LNG (liquefied natural gas): see under natural gas. ) regasification facility. The residents of the Town of Harpswell are expected to vote in first quarter 2004 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 fee-for-ser·vice adj. Charging a fee for each service performed. 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 supplied 110 MW of capacity 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. up to December 31, 2003. Demobilization de·mo·bil·ize tr.v. de·mo·bil·ized, de·mo·bil·iz·ing, de·mo·bil·iz·es 1. To discharge from military service or use. 2. To disband (troops). of the temporary facility began in early January 2004 and is expected to be complete by late spring. 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. 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. Construction of the plant commenced in December 2003 and is expected to be in-service in December 2004. Construction of MacKay River, a 165 MW facility near Fort McMurray, Alberta Fort McMurray, is a community in the Regional Municipality of Wood Buffalo, in the northeastern part of Alberta, Canada. Although it is commonly referred to and thought of as being a city, Fort McMurray is not incorporated. , was completed in fourth quarter 2003 and commissioning is underway. The fourth quarter scheduled maintenance outage of Bruce B Unit 8 was originally planned to take approximately eight weeks, but was extended after inspections identified some erosion erosion (ĭrō`zhən), general term for the processes by which the surface of the earth is constantly being worn away. The principal agents are gravity, running water, near-shore waves, ice (mostly glaciers), and wind. on support plates in three of the unit's eight steam generators A steam generator is a device used to boil water to create steam. It may refer to:
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 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. 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
Three months Year
(unaudited) ended ended
(millions of dollars except per December 31 December 31
share amounts) 2003 2002 2003 2002
------------------------------------------- ----- ----- -----
Revenues 1,319 1,338 5,357 5,214
Operating Expenses
Cost of sales 159 161 692 627
Other costs and expenses 434 423 1,682 1,546
Depreciation 222 217 914 848
----- ----- ----- -----
815 801 3,288 3,021
----- ----- ----- -----
Operating Income 504 537 2,069 2,193
Other Expenses/(Income)
Financial charges 202 215 821 867
Financial charges of joint ventures 14 23 77 90
Equity income (14) (7) (165) (33)
Interest and other income (16) (17) (60) (53)
----- ----- ----- -----
186 214 673 871
----- ----- ----- -----
Income from Continuing Operations
before Income Taxes and
Non-Controlling Interests 318 323 1,396 1,322
Income Taxes - Current and Future 108 128 535 517
Non-Controlling Interests
Preferred securities charges 10 10 36 36
Preferred share dividends 5 5 22 22
Other 2 - 2 -
----- ----- ----- -----
Net Income from Continuing
Operations 193 180 801 747
Net Income from Discontinued
Operations - - 50 -
----- ----- ----- -----
Net Income 193 180 851 747
----- ----- ----- -----
----- ----- ----- -----
Net Income Per Share
Continuing operations $0.40 $0.37 $1.66 $1.56
Discontinued operations - - 0.10 -
----- ----- ----- -----
Basic $0.40 $0.37 $1.76 $1.56
----- ----- ----- -----
----- ----- ----- -----
Diluted $0.40 $0.37 $1.76 $1.55
----- ----- ----- -----
----- ----- ----- -----
Average Shares Outstanding -
Basic (millions) 482.8 479.3 481.5 478.3
----- ----- ----- -----
----- ----- ----- -----
Average Shares Outstanding -
Diluted (millions) 485.5 481.7 483.9 480.7
----- ----- ----- -----
----- ----- ----- -----
See accompanying Notes to the Consolidated Financial Statements.
Consolidated Cash Flows
Three months Year
ended ended
(unaudited) December 31 December 31
(millions of dollars) 2003 2002 2003 2002
------------------------------------------- ----- ----- -----
Cash Generated From Operations
Net income from continuing
operations 193 180 801 747
Depreciation 222 217 914 848
Future income taxes (18) 67 230 247
Equity income in excess of
distributions received (3) - (128) (6)
Non-controlling interests 17 15 60 58
Other (8) (12) (67) (67)
----- ----- ----- -----
Funds generated from continuing
operations 403 467 1,810 1,827
Decrease in operating working
capital 29 101 112 33
----- ----- ----- -----
Net cash provided by continuing
operations 432 568 1,922 1,860
Net cash provided by/(used in)
discontinued operations - 29 (17) 59
----- ----- ----- -----
432 597 1,905 1,919
----- ----- ----- -----
Investing Activities
Capital expenditures (127) (202) (391) (599)
Acquisitions, net of cash acquired (23) (209) (570) (228)
Deferred amounts and other 43 (103) (190) (115)
----- ----- ----- -----
Net cash used in investing
activities (107) (514) (1,151) (942)
----- ----- ----- -----
Financing Activities
Dividends and preferred securities
charges (150) (139) (588) (546)
Notes payable (repaid)/issued, net (341) 182 (62) (46)
Long-term debt issued 455 - 930 -
Reduction of long-term debt (358) (256) (744) (486)
Non-recourse debt of joint ventures
issued - 20 60 44
Reduction of non-recourse debt of
joint ventures (16) (29) (71) (80)
Redemption of junior subordinated
debentures - - (218) -
Common shares issued 16 7 65 50
----- ----- ----- -----
Net cash used in financing
activities (394) (215) (628) (1,064)
----- ----- ----- -----
(Decrease)/Increase in Cash and
Short-Term Investments (69) (132) 126 (87)
Cash and Short-Term Investments
Beginning of period 407 344 212 299
----- ----- ----- -----
Cash and Short-Term Investments
End of period 338 212 338 212
----- ----- ----- -----
----- ----- ----- -----
Supplementary Cash Flow Information
Income taxes paid 28 52 220 257
Interest paid 222 227 846 866
----- ----- ----- -----
----- ----- ----- -----
See accompanying Notes to the Consolidated Financial Statements.
Consolidated Balance Sheet
(unaudited)
December 31 (millions of dollars) 2003 2002
------------------------------------------------------------ ------
ASSETS
Current Assets
Cash and short-term investments 338 212
Accounts receivable 605 691
Inventories 165 178
Other 88 107
------ ------
1,196 1,188
Long-Term Investments 733 345
Plant, Property and Equipment 17,451 17,496
Other Assets 1,164 937
----- ------
20,544 19,966
------ ------
------ ------
------------------------------------------------------------ -----
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable 367 297
Accounts payable 1,025 990
Accrued interest 208 227
Current portion of long-term debt 550 517
Current portion of non-recourse
debt of joint ventures 19 75
------ ------
2,169 2,106
Deferred Amounts 466 549
Long-Term Debt 9,465 8,815
Future Income Taxes 427 226
Non-Recourse Debt of Joint Ventures 761 1,222
Preferred Securities 22 238
------ ------
13,310 13,156
------ ------
Non-Controlling Interests
Preferred securities of subsidiary 672 674
Preferred shares of subsidiary 389 389
Other 82 -
------ ------
1,143 1,063
------ ------
Shareholders' Equity
Common shares 4,679 4,614
Contributed surplus 267 265
Retained earnings 1,185 854
Foreign exchange adjustment (40) 14
------ ------
6,091 5,747
------ ------
20,544 19,966
------ ------
------ ------
See accompanying Notes to the Consolidated Financial Statements.
Consolidated Retained Earnings
(unaudited) Year ended December 31
(millions of dollars) 2003 2002
------------------------------------------------------------ -----
Balance at beginning of year 854 586
Net income 851 747
Common share dividends (520) (479)
----- -----
1,185 854
----- -----
----- -----
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 year ended December 31, 2003 include the accounts of TransCanada and the consolidated accounts of all its subsidiaries, including TCPL. Comparative information for the year ended December 31, 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. On December 3, 2003, TransCanada increased its ownership interest in Portland Natural Gas Transmission System Partnership (Portland) from 43.4 per cent to 61.7 per cent. Subsequent to the acquisition, Portland was fully consolidated in the company's financial statements, with 38.3 per cent reflected in non-controlling interests. 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. Regulation In December 2002, the National Energy Board (NEB) approved TransCanada's application for the Canadian Mainline to charge interim tolls for transportation service, effective January 1, 2003. In August 2003, subsequent to the NEB's decision on the 2003 Tolls and Tariff Application, it approved interim tolls for the period September 1, 2003 to December 31, 2003. The NEB determined that tolls will remain interim pending a decision from the Federal Court of Appeal on TransCanada's Fair Return Review and Variance Application. Any adjustments to the interim tolls will be recorded in accordance with the final NEB decision.
3. Segmented Information
Gas
Transmission Power Corporate Total
-------------- ----------- ---------- ----------
Three
months ended
December 31
(unaudited -
millions of
dollars) 2003 2002 2003 2002 2003 2002 2003 2002
------------------------ ----- ----- ----- ----- ----- ----- -----
Revenues 982 1,007 337 331 - - 1,319 1,338
Cost of sales - - (159) (161) - - (159) (161)
Other costs and
expenses (326) (319) (106) (103) (2) (1) (434) (423)
Depreciation (202) (197) (20) (20) - - (222) (217)
----- ----- ----- ----- ----- ----- ----- -----
Operating
income/(loss) 454 491 52 47 (2) (1) 504 537
Financial charges
and non-controlling
interests (193) (205) (4) (4) (22) (21) (219) (230)
Financial charges
of joint ventures (14) (23) - - - - (14) (23)
Equity income 7 7 7 - - - 14 7
Interest and other
income 6 5 4 2 6 10 16 17
Income taxes (100) (113) (15) (15) 7 - (108) (128)
----- ----- ----- ----- ----- ----- ----- -----
Continuing
operations 160 162 44 30 (11) (12) 193 180
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
Discontinued
operations - -
----- -----
Net Income 193 180
----- -----
----- -----
Gas
Transmission Power Corporate Total
-------------- ----------- ---------- ----------
Year ended
December 31
(unaudited -
millions of
dollars) 2003 2002 2003 2002 2003 2002 2003 2002
--------------------- ----- ----- ----- ----- ----- ----- -----
Revenues 3,956 3,921 1,401 1,293 - - 5,357 5,214
Cost of sales - - (692) (627) - - (692) (627)
Other costs and
expenses (1,270)(1,166) (405) (371) (7) (9)(1,682)(1,546)
Depreciation (831) (783) (82) (65) (1) - (914) (848)
------ ----- ----- ----- ----- ----- ----- -----
Operating
income/(loss) 1,855 1,972 222 230 (8) (9) 2,069 2,193
Financial charges
and non-
controlling
interests (781) (821) (11) (13) (89) (91) (881) (925)
Financial
charges of
joint ventures (76) (90) (1) - - - (77) (90)
Equity income 66 33 99 - - - 165 33
Interest and
other income 17 17 14 13 29 23 60 53
Income taxes (459) (458) (103) (84) 27 25 (535) (517)
----- ----- ----- ----- ----- ----- ----- -----
Continuing
operations 622 653 220 146 (41) (52) 801 747
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
Discontinued
operations 50 -
----- -----
Net Income 851 747
----- -----
----- -----
Total Assets
December 31 2003 2002
(millions of dollars) (unaudited)
------------------------------------------------------------- ------
Gas Transmission 16,972 16,979
Power 2,746 2,391
Corporate 815 457
------ ------
Continuing Operations 20,533 19,827
Discontinued Operations 11 139
------ ------
20,544 19,966
------ ------
------ ------
4. Long-Term Debt
December 31 2003 2002
(millions of dollars) (unaudited)
------------------------------------------------------------ ------
Alberta System 2,341 2,892
Foreign exchange differential recoverable
through the tollmaking process (16) (271)
------ ------
2,325 2,621
------ ------
Canadian Mainline 4,913 5,277
Foreign exchange differential recoverable
through the tollmaking process (60) (330)
------ ------
4,853 4,947
------ ------
Other 2,837 1,764
------ ------
10,015 9,332
Less: current portion of long-term debt 550 517
------ ------
9,465 8,815
------ ------
------ ------
On June 9, 2003, the company issued US$350 million of unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. 4.00 per cent notes maturing on June 15, 2013. On November 18, 2003, the company issued $450 million of unsecured 5.65 per cent notes maturing on January 15, 2014. 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 December 31, 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 account 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)
December 31 2003 2002
(millions of dollars) (unaudited)
----------------------- ---------------- ----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------------- ----------------
Foreign Exchange
Cross-currency swaps
U.S. dollars 65 65 (8) (8)
---------------------------------------------------------------------
At December 31, 2003, the notional principal amounts of cross-currency
swaps were US$250 million (2002 - US$350 million).
Reconciliation of Foreign Exchange Adjustment
December 31 2003 2002
(millions of dollars) (unaudited)
----------------------- ---------------- ---------------
Balance at beginning of year 14 13
Translation (losses)/gains on
foreign currency denominated net
assets (136) 3
Foreign exchange gains/(losses)
on derivatives, and other 82 (2)
---------------- ---------------
(40) 14
---------------------------------------------------------------------
Foreign Exchange and Interest Rate Management Activity The company manages the foreign exchange risk of U.S. dollar debt, U.S. dollar expenses and the interest rate exposures of the Alberta System, the Canadian Mainline and the Foothills System through the use of foreign currency and interest rate derivatives An interest rate derivative is a derivative where the underlying asset is the right to pay or receive a (usually notional) amount of money at a given interest rate. The interest rate derivatives market is the largest derivatives market in the world. . These derivatives are comprised of contracts for periods up to nine years. Certain of the realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. and losses on these derivatives are shared with shippers on predetermined pre·de·ter·mine v. pre·de·ter·mined, pre·de·ter·min·ing, pre·de·ter·mines v.tr. 1. To determine, decide, or establish in advance: terms.
Asset/(Liability)
December 31 2003 2002
(millions of dollars) (unaudited)
-------------------------- ---------------- ---------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------------- ---------------
Foreign Exchange
Cross-currency swaps (26) (26) 56 56
Interest Rate
Interest rate swaps
Canadian dollars 2 15 4 56
U.S. dollars - 8 (1) 4
---------------------------------------------------------------------
At December 31, 2003, the notional principal amounts Notional Principal Amount In an interest rate swap, the predetermined dollar amount on which the exchanged interest payments are based. Notes: Each period's rates are multiplied by the notional principal amount to determine the value of each counterparty's payment. of cross-currency swaps were US$282 million (2002 - US$282 million). Notional principal amounts for interest rate swaps Interest Rate Swap A deal between banks or companies where borrowers switch floating-rate loans for fixed rate loans in another country. These can be either the same or different currencies. were $964 million (2002 - $874 million) and US$100 million (2002 - US$175 million). 6. Stock-Based Compensation TransCanada's accounting policy is to expense stock options. This charge is reflected in the Gas Transmission and Power segments. In the year ended December 31, 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 months and year ended December 31, 2003 were approximately $1 million and $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 The Board of Directors approved plans 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 (December Plan) and the Gas Marketing business in December 1999 and July 2001, respectively. The company's disposals under both plans were substantially completed at December 31, 2001. TransCanada's investments in Gasoducto del Pacifico, INNERGY Holdings S.A. and P.T. Paiton Energy Company approved for disposal under the December Plan will be accounted for as part of continuing operations as of December 31, 2003, due to the length of time it has taken the company to dispose of these assets. It is the intention of the company to continue with its plan to dispose of these investments. 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. certain of its remaining 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 acquiring 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 certain contracts under which it still had exposure in 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. In 2003, $50 million of the original approximately $100 million after-tax deferred gain was recognized in income. The after-tax deferred gain is included in Deferred Amounts. At December 31, 2003, TransCanada reviewed the provision for loss on discontinued operations and the deferred gain and concluded that the remaining provision was adequate and the deferral of the remaining approximately $50 million of after-tax deferred gain related to the Gas Marketing business was appropriate. Revenues from discontinued operations for the year ended December 31, 2003 were $2 million (2002 - $36 million). Net income/(loss) from discontinued operations for the year ended December 31, 2003 was $50 million, net of $29 million income taxes (2002 - nil). The provision for loss on discontinued operations at December 31, 2003 was $41 million (2002 - $83 million). The provision for loss on discontinued operations is included in Accounts Payable. 8. Investment in Bruce Power L.P. On February 14, 2003, the company acquired a 31.6 per cent interest in Bruce Power L.P. (Bruce Power) for $409 million, including closing adjustments. As part of the acquisition, the company also funded a one-third share ($75 million) of a $225 million accelerated deferred rent payment made by Bruce Power 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]. . The resulting note receivable note receivable A debt due from borrowers and evidenced by a written promise of payment. Note receivable, an entry on the asset side of many corporate balance sheets, indicates the dollar amount of loans due to be repaid by borrowers. from Bruce Power is recorded in Other Assets. 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
Capital lease 301
Power sales agreements (131)
Pension liability and other (42)
---------
409
---------
---------
The amount allocated to the investment in Bruce Power includes a purchase price allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as of $301 million to the capital lease of the Bruce Power 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 $19 million. The amount allocated to the power sales agreements will be amortized to income over the remaining term of the underlying sales contracts. 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 amount allocated to the pension liability will be amortized to income over the 11 year expected average remaining service life of Bruce Power employees, resulting in an annual amortization of $3 million. 9. Commitment On June 18, 2003, an agreement was reached among the Mackenzie Delta gas producers, the Aboriginal PipeLine Group (APG) 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, which is estimated to be approximately $90 million over three years. In the year ended December 31, 2003, TransCanada funded $34 million of this loan which is included in Other Assets. The ability to recover this investment is contingent upon Adj. 1. contingent upon - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent on, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent the outcome of the project. Supplementary Information As at December 31, 2003, TransCanada had 483,200,387 issued and outstanding common shares. In addition, there were 10,354,958 outstanding options to purchase common shares, of which 7,588,203 were exercisable as at December 31, 2003. |
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion