SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

For the month of January 2007

COMMISSION FILE No. 1-31690

TransCanada Corporation

(Translation of Registrant’s Name into English)

450 — 1 Street S.W., Calgary, Alberta, T2P 5H1, Canada

(Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F     o

Form 40-F    x

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  o

Indicated by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  o

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

 

Attached as Exhibit 99.1 to this Form 6-K is a copy of the Registrant’s news release of January 30, 2007.  This news release is being furnished, not filed, and will not be incorporated by reference into any registration statement filed by TransCanada Corporation under the Securities Act of 1933, as amended.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

		TRANSCANADA CORPORATION
		By:	/s/ Gregory A. Lohnes
			Gregory A. Lohnes
			Executive Vice-President
			and Chief Financial Officer
		By:	/s/ G. Glenn Menuz
			G. Glenn Menuz
			Vice-President and Controller

 

 

 

 

January 30, 2007

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EXHIBIT INDEX

99.1

A copy of the Registrant’s news release of January 30, 2007.

 

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EXHIBIT 99.1

DRAFT
TransCanada Corporation

 

Media Inquiries:	Jennifer Varey/Shela Shapiro		(403) 920-7859
			(800) 608-7859
Analyst Inquiries:	David Moneta/Myles Dougan		(403) 920-7911

 

NewsRelease

TransCanada Reports 2006 Net Income of $1.1 Billion
Board of Directors Increases Quarterly Dividend

CALGARY, Alberta —January 30, 2007 — (TSX: TRP) (NYSE: TRP)

Fourth Quarter and Year-End 2006 Financial Highlights

(All financial figures are unaudited and in Canadian dollars unless noted otherwise)

·                  Quarterly dividend of $0.34 per common share declared by the Board of Directors, an increase of six per cent

·                  Net income for fourth quarter 2006 of $269 million, or $0.55 per share

·                  Net income for the year ended December 31, 2006 of $1,079 million, or $2.21 per share

·                  Funds generated from operations for fourth quarter 2006 of $660 million; for the year ended December 31, 2006, $2,378 million

The Board of Directors of TransCanada Corporation (TransCanada or the company) today declared a quarterly dividend of $0.34 per common share for the quarter ending March 31, 2007, a six per cent increase over the $0.32 paid in each of the previous four quarters.  The dividend is payable on April 30, 2007 to shareholders of record at the close of business on March 30, 2007. This is the seventh consecutive annual increase in the common share dividend.

TransCanada today announced net income and net income from continuing operations (net earnings) for fourth quarter 2006 of $269 million or $0.55 per share compared to $350 million or $0.72 per share for fourth quarter 2005.

Excluding income tax refunds and related interest of $12 million in fourth quarter 2006, and an after-tax gain of $115 million in fourth quarter 2005 from the sale of the company’s interest in PT Paiton Energy Company (Paiton Energy), net earnings for fourth quarter 2006 were $257 million compared to $235 million in fourth quarter 2005, an increase of $22 million, or $0.05 per share.

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Net income for the year ended December 31, 2006 was $1,079 million or $2.21 per share, including net income from discontinued operations of $28 million or $0.06 per share. Net income for the year ended December 31, 2005 was $1,209 million or $2.49 per share.

For the year ended December 31, 2006, net earnings were $1,051 million or $2.15 per share compared to $1,209 million or $2.49 per share for the year ended December 31, 2005.  In addition to the income tax refunds and related interest of $12 million recorded in fourth quarter 2006, net earnings for the year ended December 31, 2006 included an income tax benefit of approximately $50 million in the third quarter, an $18 million after-tax bankruptcy settlement receipt from a former shipper on the Gas Transmission Northwest System, a $33 million future income tax benefit as a result of reductions in Canadian federal and provincial corporate income tax rates, and a $13 million after-tax gain related to the sale of the company’s general partnership interest in Northern Border Partners, L.P.  In addition to the $115 million gain recorded in fourth quarter 2005 noted above, net earnings for the year ended December 31, 2005 included an after-tax gain of $193 million from the sale of TransCanada’s interest in TransCanada Power, L.P. (Power LP), an after-tax gain of $49 million on the sale of TC PipeLines, LP (PipeLines LP) common units, and $13 million related to 2004 as a result of a decision from the National Energy Board (NEB) in April 2005 on Phase II of the Canadian Mainline’s 2004 Tolls and Tariff Application. Excluding all of these items, net earnings for the year ended December 31, 2006 were $925 million, compared to $839 million in the same period in 2005, an increase of $86 million or $0.17 per share.

Funds generated from operations for fourth quarter 2006 were $660 million, an increase of $130 million compared to fourth quarter 2005.  Funds generated from operations for the year ended December 31, 2006 were $2,378 million, an increase of $427 million compared to 2005.

“In 2006, TransCanada continued to expand its portfolio of high quality pipeline and energy assets by advancing a number of significant growth initiatives and delivering solid returns to our shareholders,” said Hal Kvisle, TransCanada’s Chief Executive Officer.  “We continue to invest in our North American gas transmission and power businesses and to pursue new and complementary opportunities in natural gas storage, oil pipelines and liquefied natural gas.  Over the past seven years, we have invested more than $10 billion, with $2.0 billion invested last year alone.  In each of the next three years, we have already identified approximately $1.5 billion in capital investment, in addition to our pending acquisition of ANR.

“Our financial results for the year reflect our success in diligently and prudently executing our growth strategy.  In 2006, excluding gains and non-recurring items, TransCanada recorded significant increases in net earnings and funds generated from operations. Our strong 2006 financial performance has enabled our Board of Directors to increase the dividend on the company’s common shares for the seventh year in a row,” added Mr. Kvisle.

During fourth quarter 2006, TransCanada announced the acquisition of the American Natural Resources Company and the ANR Storage Company (together, ANR) and an additional interest in Great Lakes Gas Transmission Limited Partnership (Great Lakes) for US$3.4 billion including US$457 million of assumed debt.  TransCanada anticipates closing the acquisition in first quarter 2007.  ANR operates a 17,000 kilometre (km) natural gas pipeline system with a peak-day capacity of 6.8 billion cubic feet per day (Bcf/d).  ANR also owns and operates natural gas storage facilities with a total capacity of approximately 230 billion cubic feet (Bcf).  Great Lakes owns and operates a 3,400 km interstate natural gas pipeline system with a design capacity of 2.5 Bcf/d.

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“The ANR and Great Lakes acquisition represents a unique opportunity to acquire regulated pipeline and storage assets that are a strong fit with our existing North American footprint,” said Mr. Kvisle.  “They are high quality assets that will strengthen our position as a leader in the North American gas transmission business and deliver significant value to our shareholders.”

TransCanada expects to finance the ANR acquisition in a manner that is consistent with the company’s current balance sheet capitalization.  This is aligned with the company’s intention to maintain its strong financial position and TransCanada PipeLines Limited’s ‘A’ credit ratings.  TransCanada expects the transaction to be accretive to earnings and cash flow in the first full year of ownership.

Mr. Kvisle concluded, “The announcement of the ANR acquisition was a high point in a year of solid growth and continued advancement of our high quality portfolio of growth opportunities.  In 2006, we successfully completed several projects which are now contributing earnings and cash flow.  We brought 660 megawatts of power generation into commercial production through the completion of the Bécancour cogeneration plant and the first phase of the Cartier Wind project, and began transporting gas on the Tamazunchale pipeline in Mexico.  In addition, we completed commissioning of the Edson natural gas storage facility.

“We won the bid for the 683 megawatt Halton Hills Generating Station and, with our partner, Ontario Power Generation, negotiated an agreement with the Ontario Power Authority for the 550 megawatt Portlands Energy Centre.  These two plants will add significant incremental generating capacity to the Ontario power market and, along with our Bécancour plant, will increase demand for environmentally friendly natural gas.  We continued to advance major projects including the Keystone Oil Pipeline, the Bruce Power restart and refurbishment program, and the Cacouna and Broadwater liquefied natural gas terminals.  Over the longer term, we remain a key player in projects to bring northern natural gas to market.”

Notable developments in fourth quarter 2006 and the beginning of 2007 include:

Corporate:

·                  On January 23, 2007, TransCanada filed a preliminary short form shelf prospectus with securities regulators in Canada and the United States.  The preliminary short form shelf prospectus will allow for the offering of up to $3.0 billion of common shares, first preferred shares, second preferred shares and/or subscription receipts in Canada and the United States during the 25 month period that the short form prospectus remains valid.  The nature, size and timing of any financings would be dependent on TransCanada’s assessment of its requirements for funding and general market conditions.

·                  TransCanada’s issuer rating assigned by Moody’s Investors Service (Moody’s) is A3 with a stable outlook.  TransCanada PipeLines Limited’s (TCPL) senior unsecured debt is rated A, under review with developing implications, by Dominion Bond Rating Service Limited (DBRS); A2, with a stable outlook, by Moody’s; and A-, with a negative outlook, by Standard and Poor’s (S&P).  DBRS placed TCPL’s rating under review on December 22, 2006 as a result of the announcement of the proposed acquisition of ANR and Great Lakes.  Moody’s and S&P reaffirmed their ratings after the announcement.

·                  Today, TransCanada announced that it will issue common shares from treasury at a two per cent discount under TransCanada’s Dividend Reinvestment Plan (DRP), commencing with the dividend payable on April 30, 2007.  Previously, shares purchased through the DRP have been purchased by TransCanada on the open market and provided to DRP participants at cost.  The company reserves the right to alter the discount or return to purchasing shares on the open market at any time.

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Pipelines:

·                  As noted above, on December 22, 2006 TransCanada announced plans to acquire ANR and an additional 3.55 per cent interest in Great Lakes.  In a separate transaction, PipeLines LP proposes to acquire the remaining 46.45 per cent interest in Great Lakes for US$962 million, including US$212 million of assumed debt.  TransCanada is the general partner and a common unitholder (13.4 per cent interest) of PipeLines LP.  TransCanada will become the operator of Great Lakes.  With the proposed acquisition of ANR, TransCanada’s wholly owned natural gas pipeline network will extend more than 59,000 km and offer customers unparalleled connections from traditional and emerging supply basins to growing North American markets.  This acquisition is also expected to increase TransCanada’s natural gas storage capacity to approximately 360 Bcf, making it one of North America’s largest natural gas storage operators. TransCanada anticipates closing the acquisition in the first quarter of 2007.

·                  TransCanada today announced the start of a binding Open Season for an expansion and extension of the proposed Keystone Oil Pipeline.  Through the Open Season, TransCanada seeks to obtain binding commitments to support the expansion of the proposed Keystone Pipeline from a nominal capacity of approximately 435,000 barrels per day to 590,000 barrels per day and the construction of a 468 km extension of the United States portion of the pipeline from the Nebraska/Kansas border to the refining and terminal hub near Cushing, Oklahoma.  The US$700 million expansion and extension project is targeted to be in service in fourth quarter 2010.  In December 2006, TransCanada filed an application with the NEB for a certificate of public convenience and necessity to construct and operate the Canadian portion of the Keystone Pipeline.  A decision on this application is anticipated from the NEB by the end of 2007. Oral hearings on TransCanada and Keystone’s June 2006 application to the NEB relating to the conversion of a section of the Canadian Mainline from natural gas to oil transmission concluded in November 2006.  The NEB is expected to issue a decision on the transfer application in the first quarter 2007.

·                  In December 2006, PipeLines LP closed its acquisition of an additional 50 per cent interest in the Tuscarora Gas Transmission Company (Tuscarora) for approximately US$100 million. PipeLines LP has also indirectly assumed US$37 million of Tuscarora debt.  PipeLines LP now owns or controls 99 per cent of Tuscarora.  TransCanada, the parent company of TC PipeLines GP, Inc. and the sole general partner of PipeLines LP, indirectly holds the remaining one per cent ownership interest. TransCanada has provided gas control services for the Tuscarora pipeline system since late 2002 and will become the operator of Tuscarora.

·                  TransCanada’s Tamazunchale pipeline in east-central Mexico began commercial operations on December 1, 2006.  The 130 km pipeline has an initial capacity of 170 million cubic feet per day (mmcf/d) and transports natural gas from the PEMEX gas pipeline system near Naranjos, Veracruz, to an electricity generation station near Tamazunchale, San Luis Potosi. Under the current contract with the Comisión Federal de Electricidad, beginning in 2009, the capacity of the Tamazunchale pipeline will be expanded to approximately 430 mmcf/d to meet the needs of two additional proposed power plants near Tamazunchale.

Energy:

·                  The first phase of the Cartier Wind project, the 109.5 megawatt (MW) Baie des Sables wind farm, was placed into service in late November 2006.  Construction continues on the 100.5 MW Anse à Valleau wind farm, the second of the six wind farms that comprise the Cartier Wind project in the Gaspé region of Québec.  It is expected to deliver energy to the Hydro-Québec grid by December 2007.  TransCanada has a 62 per cent interest in the Cartier Wind project which was awarded six projects by Hydro-Québec Distribution in October 2004 representing a total of 739.5 MW.

·                  In November 2006, TransCanada was awarded a 20-year Clean Energy Supply contract by the Ontario Power Authority (OPA) to build, own and operate a 683 MW natural gas-fired power plant near the Town of Halton Hills, Ontario. TransCanada expects to invest approximately $670 million in the Halton Hills Generating Station which is anticipated to be in service in the second quarter of 2010.

·                  Commissioning of the Edson natural gas storage facility in Alberta was completed at the end of fourth quarter 2006 and was placed into service December 31, 2006.  The Edson facility is expected to have a working natural gas capacity of approximately 60 petajoules and connects to the Alberta system.

Additional developments are discussed in this News Release under the title “Other Recent Developments”.

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Fourth Quarter and Year End 2006 Financial Highlights

Operating Results
(millions of dollars)		Three months ended December 31				Year ended December 31
(unaudited)		2006		2005		2006		2005
Revenues		2,091		771		7,520		6,124
Net Income
Continuing operations		269		350		1,051		1,209
Discontinued operations		—		—		28		—
		269		350		1,079		1209
Cash Flows
Funds generated from operations (1)		660		530		2,378		1,951
(Increase)/decrease in working capital		(167	)	124		(303	)	(49	)
Net cash provided by operations		493		654		2,075		1,902
Capital expenditures		570		345		1,572		754
Acquisitions, net of cash acquired		112		685		470		1,317

 

		Three months ended December 31						Year ended December 31
Common Share Statistics		2006			2005			2006			2005
Net Income Per Share - Basic
Continuing operations		$	0.55		$	0.72		$	2.15		$	2.49
Discontinued operations		—			—			0.06			—
		$	0.55		$	0.72		$	2.21		$	2.49
Dividends Declared Per Share		$	0.32		$	0.305		$	1.28		$	1.22
Common Shares Outstanding (millions)
Average for the period - Basic		488.6			487.1			488.0			486.2
End of period		489.0			487.2			489.0			487.2

(1)             Funds generated from operations is discussed further in the section”Non-GAAP Measures in this news release.

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Forward-Looking Information

Certain information in this news release includes forward-looking statements.  All forward-looking statements are based on TransCanada’s beliefs and assumptions based on information available at the time such statements were made.  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, changes in environmental and other laws and regulations, competitive factors in the pipeline and energy industry sectors, construction and completion of capital projects, access to capital markets, currency exchange rates, technological developments and the current economic condition in North America.  By its nature, such forward-looking information is subject to various risks and uncertainties, which could cause TransCanada’s actual results and experience to differ materially from the anticipated results or other expectations expressed.  Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date of this news release or as otherwise stated.  TransCanada undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.

Non-GAAP Measures

The company uses the measures “funds generated from operations” and “operating income” in this news release. These measures do not have any standardized meaning in generally accepted accounting principles (GAAP) and are therefore considered to be non-GAAP measures. These measures may not be comparable to similar measures presented by other entities. These measures have been used to provide readers with additional information on the company’s liquidity and its ability to generate funds to finance its operations.

Funds generated from operations is comprised of net cash provided by operations before changes in operating working capital.  A reconciliation of funds generated from operations to net cash provided by operations is presented in the “Fourth Quarter and Year End 2006 Financial Highlights” table in this news release. Operating income is used in the Energy segment and is comprised of revenues plus income from equity investments less operating expenses as shown on the consolidated income statement.  Refer to the Energy section in this news release for a reconciliation of operating income to net earnings.

Results of Operations

Effective June 1, 2006, TransCanada revised the composition and names of its reportable business segments to Pipelines and Energy.  The financial reporting of these segments was aligned to reflect the internal organizational structure of the company.  Pipelines is principally comprised of the company’s pipelines in Canada, the United States and Mexico.  Energy includes the company’s power operations, natural gas storage business and LNG projects in Canada and the United States. The segmented information in this news release has been retroactively restated to reflect the changes in reportable segments. These changes had no impact on consolidated net income.

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Consolidated

Segment Results-at-a-Glance (millions of dollars except per share amounts)		Three months ended December 31						Year ended December 31
(unaudited)		2006			2005			2006			2005
Pipelines
Excluding gains		126			155			547			630
Gain on sale of Northern Border Partners, L.P. interest		—			—			13			—
Gain on sale of PipeLines LP units		—			—			—			49
		126			155			560			679
Energy
Excluding gains		132			87			452			258
Gain on sale of Paiton Energy		—			115			—			115
Gains related to Power LP		—			—			—			193
		132			202			452			566
Corporate		11			(7		)	39			(36		)
Net Income
Continuing operations (1)		269			350			1,051			1,209
Discontinued operations		—			—			28			—
		269			350			1,079			1,209
Net Income Per Share
Continuing operations (2)		$	0.55		$	0.72		$	2.15		$	2.49
Discontinued operations		—			—			0.06			—
Basic		$	0.55		$	0.72		$	2.21		$	2.49
Diluted		$	0.54		$	0.71		$	2.20		$	2.47

(1)Net Income from Continuing Operations is comprised of:
Excluding gains		269			235			1,038			852
Gains related to Northern Border Partners, L.P. interest, PipeLines LP units, Power LP and Paiton Energy		—			115			13			357
		269			350			1,051			1,209
(2)Net Income Per Share from Continuing
Operations is comprised of:
Excluding gains		$	0.55		$	0.48		$	2.12		$	1.75
Gains related to Northern Border Partners, L.P. interest, PipeLines LP units, Power LP and Paiton Energy		—			0.24			0.03			0.74
		$	0.55		$	0.72		$	2.15		$	2.49

 

TransCanada’s net income and net earnings for fourth quarter 2006 were $269 million or $0.55 per share compared to $350 million or $0.72 per share for fourth quarter 2005.  The fourth quarter 2006 net earnings were lower than 2005 by $81 million or $0.17 per share, primarily due to an after-tax gain of $115 million or $0.24 per share from the sale of the company’s interest in Paiton Energy in fourth quarter 2005.  Excluding this gain, in fourth quarter 2006 the company reported an increase of $34 million in net income and net earnings, reflecting an increase in Energy’s net earnings, a decrease in Corporate’s net expenses, partially offset by a decrease in Pipelines’ net earnings, compared to 2005.

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Pipelines’ net earnings for fourth quarter 2006 decreased $29 million primarily due to lower net earnings from the Canadian Mainline and the Alberta System as a result of lower rates of return on common equity (ROE) and lower average investment bases. Net earnings from the Gas Transmission Northwest System and the North Baja System (GTN) for fourth quarter 2006 decreased due to increased operating costs and lower transportation revenues. Net earnings for TransCanada’s Other Pipelines decreased primarily due to higher project development and support costs and the impact of a weaker U.S. dollar.

Excluding the gain related to the sale of Paiton Energy in fourth quarter 2005, Energy’s net earnings for fourth quarter 2006 increased $45 million compared to fourth quarter 2005 primarily due to higher operating income from Western Power Operations, Bruce Power and Natural Gas Storage, partially offset by lower operating income from Eastern Power Operations.

Corporate’s net earnings increased $18 million to $11 million in fourth quarter 2006 primarily due to income tax refunds and related interest of approximately $12 million and other positive income tax adjustments.

TransCanada’s net income for the year ended December 31, 2006 was $1,079 million or $2.21 per share, which included net income from discontinued operations of $28 million or $0.06 per share reflecting bankruptcy settlements with Mirant Corporation and certain of its subsidiaries (Mirant) received in first quarter 2006 related to TransCanada’s Gas Marketing business divested in 2001.  Net income for the year ended December 31, 2005 was $1,209 million or $2.49 per share.

TransCanada’s net earnings for the year ended December 31, 2006 were $1,051 million or $2.15 per share compared to $1,209 million or $2.49 per share for the same period in 2005.  The decrease of $158 million or $0.34 per share was primarily due to the $357 million of gains recognized on the sales in 2005 of PipeLines LP units, the company’s interest in Power LP and Paiton Energy.

Excluding the $49 million after-tax gain on the sale of PipeLines LP units in 2005 and the $13 million after-tax gain on the sale of TransCanada’s general partner interest in Northern Border Partners, L.P. in 2006, Pipelines’ net earnings for the year ended December 31, 2006 decreased $83 million compared to the same period in 2005.  This decrease was primarily due to lower net earnings from the Canadian Mainline and the Alberta System as a result of a lower ROE and lower average investment bases in 2006, compared to 2005.  In addition, the 2005 net earnings included a positive adjustment of $13 million related to 2004, resulting from the April 2005 NEB decision on the Canadian Mainline’s 2004 Tolls and Tariff Application (Phase II).  As well, TransCanada’s Other Pipelines and GTN experienced lower net earnings in 2006.  These decreases were partially offset by an $18 million ($29 million pre-tax) GTN bankruptcy settlement from Mirant, a former shipper, recorded in 2006.

Excluding the $193 million and $115 million after-tax gains in 2005 related to the sales of the Power LP interest and Paiton Energy, respectively, Energy’s net earnings for the year ended December 31, 2006 increased $194 million compared to the same period in 2005. This increase was primarily due to higher operating income from each of its existing businesses as well as a $23 million favourable impact on future income taxes arising from reductions in Canadian federal and provincial income tax rates enacted in second quarter 2006.  These increases were partially offset by the loss of operating income associated with the sale in third quarter 2005 of the Power LP investment and the negative impact of a weaker U.S. dollar.

The increase of $75 million in Corporate’s net earnings for the year ended December 31, 2006, compared to the same period in 2005, was primarily due to approximately $12 million in income tax refunds and related interest in fourth quarter 2006, a $50 million income tax benefit in third quarter 2006, as well as a $10 million favourable impact on future income taxes in second quarter 2006 arising from reductions in Canadian federal and provincial income tax rates.  In addition, net earnings in 2006 were positively impacted by the effect of a weaker U.S. dollar.

Results from each business segment for the three months and year ended December 31, 2006 are discussed further in the “Pipelines”, “Energy” and “Corporate” sections of this news release.

Funds generated from operations of $660 million and $2,378 million for the three months and year ended December 31, 2006 increased $130 million and $427 million, respectively, when compared to the same periods in 2005.

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Pipelines

The Pipelines business generated net earnings of $126 million and $560 million for the three months and year ended December 31, 2006, respectively, compared to $155 million and $679 million for the same periods in 2005.

Pipelines Results-at-a-Glance (millions of dollars)		Three months ended December 31				Year ended December 31
(unaudited)		2006		2005		2006		2005
Wholly Owned Pipelines
Canadian Mainline		60		67		239		283
Alberta System		34		38		136		150
GTN		7		18		64		71
Foothills System		5		5		21		21
BC System		1		1		6		6
		107		129		466		531
Other Pipelines
Great Lakes		11		10		44		46
Iroquois		4		3		15		17
Portland		3		4		13		11
PipeLines LP		1		2		4		9
Ventures LP		3		3		12		12
TQM		2		2		7		7
TransGas		3		3		11		11
Gas Pacifico/INNERGY		3		4		8		6
Tamazunchale		2		—		2		—
Northern Development		(2	)	(1	)	(5	)	(4	)
General, administrative, support costs and other		(11	)	(4	)	(30	)	(16	)
		19		26		81		99
Gain on sale of Northern Border Partners, L.P. interest		—		—		13		—
Gain on sale of PipeLines LP units		—		—		—		49
		19		26		94		148
Net Earnings		126		155		560		679

 

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Wholly Owned Pipelines

The Canadian Mainline’s fourth quarter 2006 net earnings decreased $7 million compared to fourth quarter 2005 primarily due to a lower ROE, as determined by the NEB, of 8.88 per cent in 2006 compared to 9.46 per cent in 2005 and a lower average investment base. Net earnings for the year ended December 31, 2006 decreased $44 million compared to 2005. This decrease was primarily due to the combination of a lower ROE and lower average investment base in 2006 compared to 2005.  In addition, 2005 net earnings included a positive adjustment of $13 million related to 2004, as a result of the NEB’s decision in April 2005 on the Canadian Mainline’s 2004 Tolls and Tariff Application (Phase II).  This NEB decision included an increase in the deemed common equity ratio from 33 per cent to 36 per cent for 2004 which was also effective for 2005 under the 2005 tolls settlement with shippers.

The Alberta System’s net earnings of $34 million in fourth quarter 2006 decreased $4 million compared to $38 million in the same quarter of 2005. Net earnings for the year ended December 31, 2006 decreased $14 million compared to the same period in 2005. These decreases were primarily due to a lower investment base in 2006 as well as a lower ROE in 2006. Net earnings in 2006 reflected an Alberta Energy and Utilities Board (EUB) allowed ROE of 8.93 per cent compared to 9.50 per cent in 2005, both on deemed common equity of 35 per cent.

GTN’s net earnings for the three months ended December 31, 2006 were $7 million, an $11 million decrease from the same period in 2005. This decrease was primarily due to increased operating costs, lower transportation revenues and a provision with respect to non-payment of contract transportation revenue from a subsidiary of Calpine Corporation (Calpine). Net earnings for the year ended December 31, 2006 were $64 million, a $7 million decrease from the same period in 2005. This decrease was primarily due to lower transportation revenues, nine months of Calpine provision, higher operating costs in 2006 and the negative impact of a weaker U.S. dollar. These decreases were partially offset by an $18 million bankruptcy settlement ($29 million pre-tax) in first quarter 2006 with Mirant, a former shipper, and lower long-term debt interest costs.

Operating Statistics

Year ended December 31		Canadian Mainline (1)				Alberta System (2)				Gas Transmission Northwest System(3)				Foothills System				BC System
(unaudited)		2006		2005		2006		2005		2006		2005		2006		2005		2006		2005
Average investment base (millions of dollars)		7,459		7,807		4,287		4,446		n/a		n/a		645		680		205		216
Delivery volumes (Bcf)
Total		2,955		2,997		4,051		3,999		790		777		1,051		1,051		256		321
Average per day		8.1		8.2		11.1		11.0		2.2		2.1		2.9		2.9		0.7		0.9

(1)             Canadian Mainline deliveries originating at the Alberta border and in Saskatchewan in 2006 were 2,224 billion cubic feet (Bcf) (2005 - 2,215 Bcf); average per day was 6.1 Bcf (2005 - 6.1 Bcf).

(2)             Field receipt volumes for the Alberta System in 2006 were 4,160 Bcf (2005 - 4,034 Bcf); average per day was 11.4 Bcf (2005 - 11.1 Bcf).

(3)             The Gas Transmission Northwest System operates under a fixed rate model approved by the United States Federal Energy Regulatory Commission (FERC) and, as a result, the system’s current results are not dependent on average investment base.

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Other Pipelines

TransCanada’s proportionate share of net earnings from Other Pipelines was $19 million for the three months ended December 31, 2006 compared to $26 million for the same period in 2005.  Net earnings from Tamazunchale, which commenced commercial operations in December 2006, were more than offset by the impact of higher project development and support costs associated with growing the Pipelines business.

Net earnings for the year ended December 31, 2006 were $94 million compared to $148 million for the corresponding period in 2005.  Excluding the $13 million after-tax gain on the sale of the Northern Border Partners, L.P. interest recorded in 2006, and the $49 million after-tax gain on the sale of PipeLines LP units in 2005, net earnings for 2006 were $18 million lower compared to 2005.  This decrease is primarily due to higher project development and support costs associated with growing the Pipelines business, reduced ownership in PipeLines LP and a weaker U.S. dollar.

As at December 31, 2006, TransCanada had advanced $118 million to the Aboriginal Pipeline Group with respect to the Mackenzie Gas Pipeline Project and had capitalized $39 million related to Keystone.

Energy

Energy Results-at-a-Glance

(millions of dollars)		Three months ended December 31				Year ended December 31
(unaudited)		2006		2005		2006		2005
Bruce Power		59		53		235		195
Western Power Operations		109		33		297		123
Eastern Power Operations		55		68		187		137
Natural Gas Storage		30		17		93		32
Power LP Investment		—		—		—		29
General, administrative and support costs		(44	)	(36	)	(144	)	(129	)
Operating income		209		135		668		387
Financial charges		(6	)	(4	)	(23	)	(11	)
Interest income and other		—		—		5		5
Income taxes		(71	)	(44	)	(198	)	(123	)
		132		87		452		258
Gain on sale of Paiton Energy		—		115		—		115
Gains related to Power LP		—		—		—		193
Net Earnings		132		202		452		566

 

Energy’s net earnings were $132 million in fourth quarter 2006, compared to $202 million in fourth quarter 2005.  In fourth quarter 2005, TransCanada recognized a gain of $115 million on the sale of Paiton Energy.

Excluding the gain of $115 million in 2005, Energy’s net earnings of $132 million in fourth quarter 2006 increased $45 million compared to $87 million in fourth quarter 2005 due to higher operating income from Western Power Operations, Natural Gas Storage and Bruce Power.  Partially offsetting these increases were lower operating income from Eastern Power Operations and higher general, administrative and support costs.

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Bruce Power’s contribution to operating income increased $6 million in fourth quarter 2006 compared to fourth quarter 2005, primarily due to an increased ownership interest in the Bruce A facilities, the positive impact of higher generation volumes, partially offset by lower overall realized prices and higher operating expenses.

Western Power Operations’ operating income was $76 million higher in fourth quarter 2006, compared to fourth quarter 2005, primarily due to incremental earnings from the December 31, 2005 acquisition of the 756 MW Sheerness power purchase arrangement (PPA) and increased margins from a combination of higher overall realized power prices and higher market heat rates on sales of uncontracted power volumes.

Eastern Power Operations’ operating income was $13 million lower in fourth quarter 2006, compared to fourth quarter 2005, primarily due to record hurricane activity in the Gulf of Mexico which caused a significant increase in certain commodity prices and increased hydro generation volumes. As a result, higher profits were earned in 2005 from increased generation volumes as a result of unusually high water flows through the TC Hydro facilities, increased margins on the natural gas purchased and resold under the Ocean State Power (OSP) gas supply contracts and higher prices realized on power sold into the spot market.  The quarter over quarter decrease was partially offset by incremental income earned in 2006 from the startup of the 550 MW Bécancour cogeneration plant in September 2006 and the first of six wind farms at the Cartier Wind project in November 2006.

Natural Gas Storage operating income increased $13 million in fourth quarter 2006, compared to fourth quarter 2005, primarily due to higher contributions from CrossAlta as a result of increased storage capacity and higher natural gas storage spreads.

Excluding the 2005 gains of $115 million on the sale of Paiton Energy and $193 million related to the sale of the Power LP interest, Energy’s net earnings for the year ended December 31, 2006 of $452 million increased $194 million compared to $258 million for the same period in 2005.  The increase was due to higher contributions from each of its existing businesses and a $23 million decrease in future income taxes resulting from reductions in Canadian federal and provincial corporate income tax rates enacted in second quarter 2006.  Partially offsetting these increases was the loss of operating income associated with the sale of the Power LP interest in third quarter 2005 and reduced U.S. earnings due to a weaker U.S. dollar.

Bruce Power

Effective October 31, 2005, TransCanada increased its interest in the Bruce A units through the formation of the Bruce A partnership.  Bruce A subleases its facilities from Bruce B.  TransCanada commenced proportionately consolidating its investments in Bruce A and Bruce B effective October 31, 2005.  At December 31, 2006, TransCanada had a 48.7 per cent interest in Bruce A and a 31.6 per cent interest in Bruce B. The Bruce Power financial results on the following page reflect the operations of the full six-unit facility for both periods.

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Bruce Power Results-at-a-Glance(1)		Three months ended December 31						Year ended December 31
(unaudited)		2006			2005			2006			2005
Bruce Power (100 per cent basis)
(millions of dollars)
Revenues
Power		465			476			1,861			1,907
Other (2)		28			13			71			35
		493			489			1,932			1,942
Operating expenses
Operations and maintenance		(256		)	(231		)	(912		)	(871		)
Fuel		(28		)	(19		)	(96		)	(77		)
Supplemental rent		(43		)	(41		)	(170		)	(164		)
Depreciation and amortization		(35		)	(53		)	(134		)	(198		)
		(362		)	(344		)	(1,312		)	(1,310		)
Revenues, net of operating expenses		131			145			620			632
Financial charges under equity accounting		—			(6		)	—			(58		)
		131			139			620			574
TransCanada’s proportionate share		58			51			228			188
Adjustments		1			2			7			7
TransCanada’s operating income from Bruce Power(3)		59			53			235			195
Bruce Power - Other Information
Plant availability
Bruce A		97		%				81		%
Bruce B		85		%				91		%
Combined Bruce Power		89		%	79		%	88		%	80		%
Sales volumes (GWh) (4)
Bruce A - 100 per cent		3,210						10,650
Bruce B - 100 per cent		6,030						25,820
Combined Bruce Power - 100 per cent		9,240			8,300			36,470			32,900
TransCanada’ s proportionate share		3,469			2,946			13,317			10,732
Results per MWh (5)
Bruce A revenues		$	59					$	58
Bruce B revenues		$	46					$	48
Combined Bruce Power revenues		$	50		$	57		$	51		$	58
Combined Bruce Power fuel		$	3		$	2		$	3		$	2
Combined Bruce Power operating expenses(6)		$	38		$	41		$	35		$	40
Percentage of output sold to spot market		30		%	35		%	35		%	49		%

(1)             All information in the table includes adjustments to eliminate the effects of inter-partnership transactions between Bruce A and Bruce B.

(2)             Includes fuel cost recoveries for Bruce A of $11 million and $30 million, respectively, for the three and 12 months ended December 31, 2006.

(3)             TransCanada’s consolidated equity income includes $26 million and $168 million which represents TransCanada’s 31.6 per cent share of Bruce Power’s earnings for the one and ten months ended October 31, 2005, respectively.

(4)             Gigawatt hours.

(5)             Megawatt hours.

(6)             Net of fuel cost recoveries.

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TransCanada’s operating income of $59 million from its combined investment in Bruce Power increased $6 million in fourth quarter 2006, compared to fourth quarter 2005, primarily due to an increased ownership interest in the Bruce A facilities and the positive impact of higher generation volumes, partially offset by lower overall realized prices and higher operating costs.

TransCanada’s share of Bruce Power’s generation for fourth quarter 2006 increased 523 GWh to 3,469 GWh, compared to fourth quarter 2005 generation of 2,946 GWh, as a result of an increased ownership in the Bruce A facilities and fewer planned and unplanned maintenance outage days in fourth quarter 2006.  Bruce Power prices achieved during fourth quarter 2006 (excluding other revenues) were $50 per MWh, compared to $57 per MWh in fourth quarter 2005.  Bruce Power’s operating expenses (net of fuel cost recoveries) in fourth quarter 2006 decreased to $38 per MWh from $41 per MWh in fourth quarter 2005 primarily due to increased output in fourth quarter 2006.

Approximately 43 reactor days of planned maintenance outages as well as approximately 12 reactor days of unplanned outages occurred on the six operating units in fourth quarter 2006.  In fourth quarter 2005, Bruce Power experienced 66 reactor days of planned maintenance outages and 35 reactor days of unplanned outages.  The Bruce Power units ran at a combined average availability of 89 per cent in fourth quarter 2006, compared to a 79 per cent average availability during fourth quarter 2005.

TransCanada’s operating income from its combined investment in Bruce Power for the year ended December 31, 2006 was $235 million compared to $195 million for the same period in 2005.  The increase of $40 million was primarily due to higher sales volumes resulting from increased plant availability and an increased ownership interest in the Bruce A facilities, partially offset by lower overall realized prices.

Combined Bruce Power prices achieved for the year ended December 31, 2006 (excluding other revenues) were $51 per MWh compared to $58 per MWh for 2005.  Bruce Power’s combined operating expenses (net of fuel cost recoveries) decreased to $35 per MWh for the year ended December 31, 2006 from $40 per MWh in 2005 primarily due to increased output in 2006.  The Bruce units ran at a combined average availability of 88 per cent in the year ended December 31, 2006 compared to 80 per cent in 2005.

The overall plant availability percentage in 2007 is expected to be in the low 90s for the four Bruce B units and in the mid 70s for the two operating Bruce A units.  Two planned outages are scheduled for Bruce A Unit 3 with the first outage expected to last one month in second quarter and a second outage expected to last approximately two months beginning in late third quarter 2007. A one month outage of Bruce A Unit 4 is expected to commence in first quarter 2007. The only planned maintenance outage for 2007 for Bruce B is an approximate two and a half month outage for Unit 6 that began in January 2007 and is expected to be completed in early second quarter 2007.

Income from Bruce B is directly impacted by the fluctuations in wholesale spot market prices for electricity.  Income from both Bruce A and Bruce B units is impacted by overall plant availability, which in turn is impacted by scheduled and unscheduled maintenance.  As a result of a contract with the OPA, in first quarter 2006 all of the output from Bruce A was sold at a fixed price of $57.37 per MWh (before recovery of fuel costs from the OPA) and sales from the Bruce B Units 5 to 8 were subject to a floor price of $45 per MWh.  Both of these reference prices are adjusted annually on April 1 for inflation and other potential adjustments in accordance with the terms of the contract with OPA.  Effective April 1, 2006, the Bruce A price is $58.63 per MWh and the Bruce B floor price is $45.99 per MWh.  Payments received pursuant to the Bruce B floor price mechanism may be subject to a recapture payment dependent on annual spot prices over the term of the contract.  Bruce B net earnings included no amounts received pursuant to this floor mechanism to date.  To further reduce its exposure to spot market prices, Bruce B has entered into fixed price sales contracts to sell forward approximately 6,900 GWh of output for 2007.

The capital cost of Bruce A’s four unit, seven year restart and refurbishment project is expected to total approximately $4.25 billion with TransCanada’s share being approximately $2.125 billion.  As at December 31, 2006, Bruce A had incurred $1.092 billion with respect to the restart and refurbishment project.

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Western Power Operations

Western Power Operations Results-at-a-Glance
(millions of dollars)		Three months ended December 31				Year ended December 31
(unaudited)		2006		2005		2006		2005
Revenue
Power		378		235		1,185		715
Other (1)		35		50		169		158
		413		285		1,354		873
Commodity purchases resold
Power		(233	)	(163	)	(767	)	(476	)
Other (1)		(32	)	(37	)	(135	)	(104	)
		(265	)	(200	)	(902	)	(580	)
Plant operating costs and other		(35	)	(47	)	(135	)	(149	)
Depreciation		(4	)	(5	)	(20	)	(21	)
Operating income		109		33		297		123

(1)             Other includes Cancarb Thermax and natural gas sales.

Western Power Operations Sales Volumes
(GWh)		Three months ended December 31				Year ended December 31
(unaudited)		2006		2005		2006		2005
Supply
Generation		637		554		2,259		2,245
Purchased
Sundance A & B and Sheerness PPAs		3,192		1,837		12,712		6,974
Other purchases		445		684		1,905		2,687
		4,274		3,075		16,876		11,906
Contracted vs. Spot
Contracted		3,053		2,804		11,029		10,374
Spot		1,221		271		5,847		1,532
		4,274		3,075		16,876		11,906

 

Western Power Operations’ operating income of $109 million and $297 million for the three months and year ended December 31, 2006 increased $76 million and $174 million, respectively, compared to the same periods in 2005.  These increases were primarily due to incremental earnings from the December 31, 2005 acquisition of the 756 MW Sheerness PPA and increased margins from a combination of higher overall realized power prices and higher market heat rates on uncontracted volumes of power sold.  The market heat rate is determined by dividing the average price of power per MWh by the average price of natural gas per gigajoule (GJ) for a given period.  Market heat rates in fourth quarter 2006 increased by approximately 70 per cent as a result of an approximate 40 per cent ($4.25 per GJ) decrease in average spot market natural gas prices in Alberta, while average spot market power prices remained relatively unchanged from fourth quarter 2005.  A higher portion of power sales volumes were sold by the company into the spot market in fourth quarter 2006, compared to 2005, due to the acquisition of the Sheerness PPA.  TransCanada manages the sale of its supply volumes on a portfolio basis.  A portion of TransCanada’s supply is held for sale in the spot market for operational reasons and is dependent upon the ability to transact in forward sales markets at acceptable contract terms.  The approach to portfolio management assists in minimizing costs in situations where TransCanada would otherwise have to purchase electricity in the open market to fulfill its contractual sales obligations.

Power revenues and commodity purchases resold increased in fourth quarter 2006, compared to fourth quarter 2005, primarily due to the acquisition of the Sheerness PPA.  Higher overall realized power sales prices in fourth quarter 2006 also increased power revenues.  Generation volumes of 637 GWh in fourth quarter 2006 increased 83 GWh compared to fourth quarter 2005 primarily due to the return to service of the Bear Creek facility in August 2006.  The company’s purchased power volumes and percentage of power volumes sold in the Alberta spot market increased in fourth quarter 2006 compared to 2005 due to the acquisition of the Sheerness PPA.  Approximately 29 per cent of power sales volumes were sold into the spot market in fourth quarter 2006 compared to nine per cent in fourth quarter 2005.  To reduce its exposure to spot market prices on uncontracted volumes, as at December 31, 2006, Western Power Operations had fixed price power sales contracts to sell approximately 10,600 GWh for 2007.

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Eastern Power Operations

Eastern Power Operations Results-at-a-Glance
(millions of dollars)		Three months ended December 31				Year ended December 31
(unaudited)		2006		2005		2006		2005
Revenue
Power		262		125		789		505
Other (1)		68		158		292		412
		330		283		1,081		917
Commodity purchases resold
Power		(95	)	(32	)	(379	)	(215	)
Other (1)		(61	)	(136	)	(257	)	(373	)
		(156	)	(168	)	(636	)	(588	)
Plant operating costs and other		(108	)	(40	)	(226	)	(167	)
Depreciation		(11	)	(7	)	(32	)	(25	)
Operating income		55		68		187		137

(1)             Other includes natural gas.

Eastern Power Operations Sales Volumes (Gwh)		Three months ended December 31				Year ended December 31
(unaudited)		2006		2005		2006		2005
Supply
Generation		2,007		873		4,700		2,879
Purchased		760		489		3,091		2,627
		2,767		1,362		7,791		5,506
Contracted vs. Spot
Contracted		2,659		1,154		7,374		4,919
Spot		108		208		417		587
		2,767		362		7,791		5,506

 

Eastern Power Operations’ operating income was $13 million lower in fourth quarter 2006 compared to fourth quarter 2005.  Record hurricane activity in the Gulf of Mexico in 2005 caused a significant increase in certain commodity prices and increased hydro generation volumes. As a result, higher profits were earned in 2005 from increased generation volumes as a result of unusually high water flows through the TC Hydro facilities, increased margins on the natural gas purchased and resold under the OSP gas supply contracts and higher prices realized on power sold into the spot market.  The quarter over quarter decrease was partially offset by incremental income earned in 2006 from the startup of both the 550 MW Bécancour cogeneration plant in September 2006 and the first of six wind farms at the Cartier Wind project in November 2006.

Operating income for the year ended December 31, 2006 was $187 million or $50 million higher than the $137 million earned in the same period of 2005.  This increase was primarily due to incremental income from a full year of ownership of the TC Hydro generation assets acquired April 1, 2005, the placing into service of the 550 MW Bécancour cogeneration plant in September 2006, a $10 million ($16 million pre-tax) one-time restructuring payment in first quarter 2005 from OSP to its natural gas fuel suppliers, and higher overall margins on higher power sales volumes in 2006.  Partially offsetting these increases was the negative impact of a weaker U.S. dollar in 2006 compared to 2005.

Generation volumes in fourth quarter 2006 increased 1,134 GWh to 2,007 GWh compared to 873 GWh in fourth quarter 2005 primarily due to the placing into service of the Bécancour facility.

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