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U.S. Securities and Exchange Commission
Washington, D.C. 20549

Form 40-F/A
Amendment No. 1


o

REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE SECURITIES
EXCHANGE ACT OF 1934
OR

ý

ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended            December 31, 2004            

 

Commission File Number    1-31690

TRANSCANADA CORPORATION
(Exact Name of Registrant as specified in its charter)

Canada
(Jurisdiction of incorporation or organization)

4922, 4923, 4924, 5172
(Primary Standard Industrial Classification Code Number (if applicable))

Not Applicable
(I.R.S. Employer Identification Number (if applicable))

TransCanada Tower, 450 - 1 Street S.W.
Calgary, Alberta, Canada, T2P 5H1
(403) 920-2000
(Address and telephone number of Registrant's principal executive offices)

CT Corporation, Suite 2610, 520 Pike Street
Seattle, Washington, 98101; (206) 622-4511; 1-800-456-4511
(Name, address (including zip code) and telephone number (including area code)
of agent for service in the United States)

Securities registered pursuant to section 12(b) of the Act:

Title of each class
  Name of each exchange on which registered
Common Shares (including Rights under Shareholder Rights Plan)   New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:    None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:    
None

For annual reports, indicate by check mark the information filed with this Form:

o Annual Information Form                    ý Audited annual financial statements

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.

At December 31, 2004, 484,914,323 common shares
were issued and outstanding

Indicate by check mark whether the Registrant by filing 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 (the "Exchange Act"). If "Yes" is marked, indicate the file number assigned to the Registrant in connection with such Rule.


Yes

 

o

 

No

 

ý

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.


Yes

 

ý

 

No

 

o




        The documents (or portions thereof) forming part of this Form 40-F/A are incorporated by reference into the following registration statements under the Securities Act of 1933, as amended:

Form

  Registration
No.

S-8   33-00958
S-8   333-5916
S-8   333-8470
S-8   333-9130
F-3   33-13564
F-3   333-6132

EXPLANATORY NOTE

        TransCanada Corporation ("TransCanada") is filing this Form 40-F/A Amendment No. 1 to its Annual Report on Form 40-F for the year ended December 31, 2004 which was filed with the Securities and Exchange Commission on March 14, 2005, to refile its 2004 Consolidated Financial Statements, which contains a restated Note 22 (U.S. GAAP). The restatement relates to the reporting of TransCanada's investment in TransCanada Power, L.P. For U.S. generally accepted accounting principles (GAAP) purposes, certain transactions involving TransCanada Power, L.P., in the period 1997 to 2001, should have been accounted for differently than under Canadian GAAP. This has been corrected on a retroactive basis. The restated Note 22 has no impact on TransCanada's 2004 financial statements as prepared under Canadian GAAP or on total shareholders' equity at December 31, 2004 as prepared under U.S. GAAP.

        Other than as expressly set forth above, this Form 40-F/A does not, and does not purport to, update, or restate the information in any Item of the Form 40-F or reflect any events that have occurred after the Form 40-F was filed.

UNDERTAKING

        The Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an Annual Report on Form 40-F arises; or transactions in said securities.

2



SIGNATURES

        Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this Annual Report to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Calgary, Province of Alberta, Canada.

    TRANSCANADA CORPORATION

 

 

Per:

/s/ Russell K. Girling

RUSSELL K. GIRLING, Executive Vice-President,
Corporate Development and Chief Financial Officer

 

 

 

Date: July 29, 2005

3


DOCUMENTS FILED AS PART OF THIS REPORT

13.1   Restated 2004 Consolidated Audited Financial Statements (included on pages 68 through 108 of the TransCanada 2004 Annual Report to Shareholders).

13.2

 

U.S. GAAP reconciliation of the Restated 2004 Consolidated Audited Financial Statements (included on pages 101 through 108 of the TransCanada 2004 Annual Report to Shareholders).

99.1

 

Comments by Auditors for U.S. Readers on Canada — U.S. Reporting Difference.

EXHIBITS

23.1   Consent of KPMG LLP Chartered Accountants.

31.1

 

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

 

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

4


 

 

 

67



 

AUDITORS’ REPORT

To the Shareholders of TransCanada Corporation

 

We have audited the consolidated balance sheets of TransCanada Corporation as at December 31, 2004 and 2003 and the consolidated statements of income, retained earnings and cash flows for the years in the three-year period ended December 31, 2004.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards.  Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these revised consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2004 and 2003 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2004 in accordance with Canadian generally accepted accounting principles.

Our previous report dated February 28, 2005 has been withdrawn and the financial statements have been revised as explained in note 22 to the revised consolidated financial statements.

 

 

Chartered Accountants

 

/s/ KPMG LLP

 

Calgary, Canada

February 28, 2005, except

as to note 22 which is

as of July 28, 2005

 

 

68



 

CONSOLIDATED INCOME

 

Year ended December 31 (millions of dollars except per share amounts)

 

2004

 

2003

 

2002

 

 

 

 

 

 

 

 

 

Revenues

 

5,107

 

5,357

 

5,214

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

Cost of sales

 

539

 

692

 

627

 

Other costs and expenses

 

1,635

 

1,682

 

1,546

 

Depreciation

 

945

 

914

 

848

 

 

 

3,119

 

3,288

 

3,021

 

 

 

 

 

 

 

 

 

Operating Income

 

1,988

 

2,069

 

2,193

 

 

 

 

 

 

 

 

 

Other Expenses/(Income)

 

 

 

 

 

 

 

Financial charges (Note 9)

 

810

 

821

 

867

 

Financial charges of joint ventures

 

60

 

77

 

90

 

Equity income (Note 7)

 

(171

)

(165

)

(33

)

Interest income and other

 

(65

)

(60

)

(53

)

Gains related to Power LP (Note 8)

 

(197

)

 

 

 

 

437

 

673

 

871

 

Income from Continuing Operations before Income Taxes and
Non-Controlling Interests

 

1,551

 

1,396

 

1,322

 

Income Taxes (Note 15)

 

 

 

 

 

 

 

Current

 

431

 

305

 

270

 

Future

 

77

 

230

 

247

 

 

 

508

 

535

 

517

 

Non-Controlling Interests (Note 12)

 

63

 

60

 

58

 

Net Income from Continuing Operations

 

980

 

801

 

747

 

Net Income from Discontinued Operations (Note 21)

 

52

 

50

 

 

Net Income

 

1,032

 

851

 

747

 

 

 

 

 

 

 

 

 

Net Income Per Share (Note 13)

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

Continuing operations

 

$

2.02

 

$

1.66

 

$

1.56

 

Discontinued operations

 

0.11

 

0.10

 

 

 

 

$

 2.13

 

$

 1.76

 

$

 1.56

 

Diluted

 

 

 

 

 

 

 

Continuing operations

 

$

 2.01

 

$

 1.66

 

$

 1.55

 

Discontinued operations

 

0.11

 

0.10

 

 

 

 

$

 2.12

 

$

 1.76

 

$

 1.55

 

 

The accompanying notes to the consolidated financial statements are an integral part of these statements.

 

69



 

CONSOLIDATED CASH FLOWS

 

Year ended December 31 (millions of dollars)

 

2004

 

2003

 

2002

 

 

 

 

 

 

 

 

 

Cash Generated from Operations

 

 

 

 

 

 

 

Net income from continuing operations

 

980

 

801

 

747

 

Depreciation

 

945

 

914

 

848

 

Future income taxes

 

77

 

230

 

247

 

Gains related to Power LP

 

(197

)

 

 

Equity income in excess of distributions received (Note 7)

 

(123

)

(119

)

(6

)

Non-controlling interests

 

63

 

60

 

58

 

Pension funding in excess of expense

 

(29

)

(65

)

(33

)

Other

 

(42

)

(11

)

(34

)

Funds generated from continuing operations

 

1,674

 

1,810

 

1,827

 

Decrease in operating working capital (Note 19)

 

34

 

112

 

33

 

Net cash provided by continuing operations

 

1,708

 

1,922

 

1,860

 

Net cash (used in)/provided by discontinued operations

 

(6

)

(17

)

59

 

 

 

1,702

 

1,905

 

1,919

 

 

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

 

 

Capital expenditures

 

(476

)

(391

)

(599

)

Acquisitions, net of cash acquired (Note 8)

 

(1,516

)

(570

)

(228

)

Disposition of assets (Note 8)

 

410

 

 

 

Deferred amounts and other

 

(24

)

(138

)

(112

)

Net cash used in investing activities

 

(1,606

)

(1,099

)

(939

)

 

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

 

 

Dividends and preferred securities charges

 

(623

)

(588

)

(546

)

Notes payable issued/(repaid), net

 

179

 

(62

)

(46

)

Long-term debt issued

 

1,042

 

930

 

 

Reduction of long-term debt

 

(997

)

(744

)

(486

)

Non-recourse debt of joint ventures issued

 

233

 

60

 

44

 

Reduction of non-recourse debt of joint ventures

 

(113

)

(71

)

(80

)

Partnership units of joint ventures issued

 

88

 

 

 

Common shares issued

 

32

 

65

 

50

 

Redemption of junior subordinated debentures

 

 

(218

)

 

Net cash used in financing activities

 

(159

)

(628

)

(1,064

)

 

 

 

 

 

 

 

 

Effect of Foreign Exchange Rate Changes on Cash and
Short-Term Investments

 

(87

)

(52

)

(3

)

 

 

 

 

 

 

 

 

(Decrease)/Increase in Cash and Short-Term Investments

 

(150

)

126

 

(87

)

 

 

 

 

 

 

 

 

Cash and Short-Term Investments

 

 

 

 

 

 

 

Beginning of year

 

338

 

212

 

299

 

 

 

 

 

 

 

 

 

Cash and Short-Term Investments

 

 

 

 

 

 

 

End of year

 

188

 

338

 

212

 

 

The accompanying notes to the consolidated financial statements are an integral part of these statements.

 

70



 

CONSOLIDATED BALANCE SHEET

 

December 31 (millions of dollars)

 

2004

 

2003

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

Current Assets

 

 

 

 

 

Cash and short-term investments

 

188

 

338

 

Accounts receivable

 

627

 

605

 

Inventories

 

174

 

165

 

Other

 

120

 

88

 

 

 

1,109

 

1,196

 

Long-Term Investments (Note 7)

 

840

 

733

 

Plant, Property and Equipment (Notes 4, 9 and 10)

 

18,704

 

17,415

 

Other Assets (Note 5)

 

1,477

 

1,357

 

 

 

22,130

 

20,701

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Notes payable (Note 16)

 

546

 

367

 

Accounts payable

 

1,135

 

1,087

 

Accrued interest

 

214

 

208

 

Current portion of long-term debt (Note 9)

 

766

 

550

 

Current portion of non-recourse debt of joint ventures (Note 10)

 

83

 

19

 

 

 

2,744

 

2,231

 

Deferred Amounts (Note 11)

 

666

 

561

 

Long-Term Debt (Note 9)

 

9,713

 

9,465

 

Future Income Taxes (Note 15)

 

509

 

427

 

Non-Recourse Debt of Joint Ventures (Note 10)

 

779

 

761

 

Preferred Securities (Note 12)

 

19

 

22

 

 

 

14,430

 

13,467

 

 

 

 

 

 

 

Non-Controlling Interests (Note 12)

 

1,135

 

1,143

 

 

 

 

 

 

 

Shareholders’ Equity

 

 

 

 

 

Common shares (Note 13)

 

4,711

 

4,679

 

Contributed surplus

 

270

 

267

 

Retained earnings

 

1,655

 

1,185

 

Foreign exchange adjustment (Note 14)

 

(71

)

(40

)

 

 

6,565

 

6,091

 

Commitments, Contingencies and Guarantees (Note 20)

 

22,130

 

20,701

 

 

The accompanying notes to the consolidated financial statements are an integral part of these statements.

 

On behalf of the Board:

 

 

 

 

 

 

 

 

/s/ Harold N. Kvisle

 

 

/s/ Harry G. Schaefer

 

Harold N. Kvisle

 

Harry G. Schaefer

Director

 

Director

 

71



 

CONSOLIDATED RETAINED EARNINGS

 

Year ended December 31 (millions of dollars)

 

2004

 

2003

 

2002

 

 

 

 

 

 

 

 

 

Balance at beginning of year

 

1,185

 

854

 

586

 

Net income

 

1,032

 

851

 

747

 

Common share dividends

 

(562

)

(520

)

(479

)

 

 

1,655

 

1,185

 

854

 

 

The accompanying notes to the consolidated financial statements are an integral part of these statements.

 

72



 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

TransCanada Corporation (the Company or TransCanada) is a leading North American energy company. TransCanada operates in two business segments, Gas Transmission and Power, each of which offers different products and services.

 

GAS TRANSMISSION

 

The Gas Transmission segment owns and operates the following natural gas pipelines:

 

•     a natural gas transmission system extending from the Alberta border east into Québec (the Canadian Mainline);

•     a natural gas transmission system in Alberta (the Alberta System);

•     a natural gas transmission system extending from the British Columbia/Idaho border to the Oregon/California border, traversing Idaho, Washington and Oregon (the Gas Transmission Northwest System);

•     a natural gas transmission system extending from central Alberta to the B.C., Saskatchewan and the United States borders (the Foothills System);

•     a natural gas transmission system extending from the Alberta border west into southeastern B.C. (the BC System);

•     a natural gas transmission system extending from a point near Ehrenberg, Arizona to the Baja California, Mexico/California border (the North Baja System); and

•     natural gas transmission systems in Alberta which supply natural gas to the oil sands region of northern Alberta and to a petrochemical complex at Joffre, Alberta (Ventures LP).

 

Gas Transmission also holds the Company’s investments in other natural gas pipelines and natural gas storage facilities located primarily in Canada and the U.S. In addition, Gas Transmission investigates and develops new natural gas transmission, natural gas storage and liquefied natural gas regasification facilities in Canada and the U.S.

 

POWER

 

The Power segment builds, owns and operates electrical power generation plants, and markets electricity. Power also holds the Company’s investments in other electrical power generation plants. This business operates in Canada and the U.S.

 

NOTE 1 Accounting Policies

 

The consolidated financial statements of the Company have been prepared by Management in accordance with Canadian generally accepted accounting principles (GAAP). These accounting principles are different in some respects from U.S. GAAP and the significant differences are described in Note 22. Amounts are stated in Canadian dollars unless otherwise indicated. Certain comparative figures have been reclassified to conform with the current year’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 which have been made using careful judgment. In the opinion of Management, these consolidated financial statements have been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below.

 

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 basis for common shares of TransCanada. As a result, TCPL became a wholly-owned subsidiary of TransCanada. The consolidated financial statements for the years ended December 31, 2004 and 2003 include the accounts of TransCanada, the consolidated accounts of all subsidiaries, including TCPL, and TransCanada’s proportionate share of the accounts of the Company’s joint venture investments. Comparative information for the year ended December 31, 2002 is that of TCPL, its subsidiaries and its proportionate share of the accounts of its joint venture investments at that time.

 

73



 

On November 1, 2004, the Company acquired a 100 per cent interest in the Gas Transmission Northwest System and the North Baja System (collectively GTN) and, as a result, GTN was consolidated subsequent to that date. In December 2003, TransCanada increased its ownership interest in Portland Natural Gas Transmission System Partnership (Portland) to 61.7 per cent from 43.4 per cent. Subsequent to the acquisition, Portland was consolidated in the Company’s financial statements with 38.3 per cent reflected in non-controlling interests. In August 2003, the Company acquired the remaining interests in Foothills Pipe Lines Ltd. and its subsidiaries (Foothills) previously not held by TransCanada, and Foothills was consolidated subsequent to that date.

 

TransCanada uses the equity method of accounting for investments over which the Company is able to exercise significant influence.

 

Regulation  The Canadian Mainline, the BC System, the Foothills System, and Trans Québec & Maritimes Pipeline Inc. (Trans Québec & Maritimes) are subject to the authority of the National Energy Board (NEB) and the Alberta System is regulated by the Alberta Energy and Utilities Board (EUB). These Canadian natural gas transmission operations are regulated with respect to the determination of revenues, tolls, construction and operations. The NEB approved interim tolls for 2004 for the Canadian Mainline. The tolls will remain interim pending a decision on Phase II of the 2004 Tolls and Tariff Application, which will address capital structure, for the Canadian Mainline. Any adjustments to the interim tolls will be recorded in accordance with the NEB decision. The Gas Transmission Northwest System, the North Baja System and the other natural gas pipelines in the U.S. are subject to the authority of the Federal Energy Regulatory Commission (FERC). In order to appropriately reflect the economic impact of the regulators’ decisions regarding the Company’s revenues and tolls, and to thereby achieve a proper matching of revenues and expenses, the timing of recognition of certain revenues and expenses in these regulated businesses may differ from that otherwise expected under GAAP.

 

Cash and Short-Term Investments  The Company’s short-term investments with original maturities of three months or less are considered to be cash equivalents and are recorded at cost, which approximates market value.

 

Inventories  Inventories are carried at the lower of average cost or net realizable value and primarily consist of materials and supplies including spare parts and storage gas.

 

Plant, Property and Equipment

 

Gas Transmission  Plant, property and equipment of natural gas transmission operations are carried at cost. Depreciation is calculated on a straight-line basis. Pipeline and compression equipment are depreciated at annual rates ranging from two to six per cent and metering and other plant are depreciated at various rates. An allowance for funds used during construction, using the rate of return on rate base approved by the regulators, is capitalized and included in the cost of gas transmission plant.

 

Power  Plant, property and equipment in the Power business are recorded at cost and depreciated on a straight-line basis over estimated service lives at average annual rates generally ranging from two to four per cent. The cost of major overhauls of equipment is capitalized and depreciated over the estimated service lives. Interest is capitalized on capital projects.

 

Corporate  Corporate plant, property and equipment are recorded at cost and depreciated on a straight-line basis over estimated useful lives at average annual rates ranging from three to 20 per cent.

 

Power Purchase Arrangements  Power purchase arrangements (PPAs) are long-term contracts to purchase or sell power on a predetermined basis. The initial payments for PPAs acquired by TransCanada are deferred and amortized over the terms of the contracts, from the dates of acquisition, which range from eight to 23 years. Certain PPAs under which TransCanada sells power are accounted for as operating leases and, accordingly, the related plant, property and equipment are accounted for as assets under operating leases.

 

Stock Options  TransCanada’s Stock Option Plan permits the award of options to purchase the Company’s common shares to certain employees, some of whom are officers. The contractual life of options granted prior to 2003 is ten years and for options granted in 2003 and subsequently, the contractual life is seven years. Options may be exercised at a price determined at the time the option is awarded. Generally, for awards granted prior to 2003, 25 per cent of the options vest on the award date and 25 per cent on each of the three following award date anniversaries. For awards granted subsequent to 2002, no options vest on the award date and 33.3 per cent vest on each of the three following award date anniversaries. Effective January 1, 2002, TransCanada adopted the fair value method of accounting for stock options. The Company is recording compensation expense over the three year vesting period. This charge is reflected in the Gas Transmission and Power segments.

 

74



 

Income Taxes  As prescribed by the regulators, the taxes payable method of accounting for income taxes is used for tollmaking purposes for Canadian natural gas transmission operations. Under the taxes payable method, it is not necessary to provide for future income taxes. As permitted by Canadian GAAP, this method is also used for accounting purposes, since there is reasonable expectation that future taxes payable will be included in future costs of service and recorded in revenues at that time. The liability method of accounting for income taxes is used for the remainder of the Company’s operations. Under this method, future tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Future income tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. Changes to these balances are recognized in income in the period in which they occur.

 

Canadian income taxes are not provided on the unremitted earnings of foreign investments as the Company does not intend to repatriate these earnings in the foreseeable future.

 

Foreign Currency Translation  Most of the Company’s foreign operations are self-sustaining and are translated into Canadian dollars using the current rate method. Under this method, assets and liabilities are translated at period end exchange rates and items included in the statements of consolidated income, consolidated retained earnings and consolidated cash flows are translated at the exchange rates in effect at the time of the transaction. Translation adjustments are reflected in the foreign exchange adjustment in Shareholders’ Equity.

 

Certain foreign operations included in TransCanada’s investment in TransCanada Power, L.P. (Power LP) are integrated and are translated into Canadian dollars using the temporal method. Under this method, monetary assets and liabilities are translated at period end exchange rates, non-monetary assets and liabilities are translated at historical exchange rates, revenues and expenses are translated at the exchange rate in effect at the time of the transaction and depreciation of assets translated at historical rates is translated at the same rate as the asset to which it relates. Gains and losses on translation are reflected in income when incurred.

 

Exchange gains or losses on the principal amounts of foreign currency debt and preferred securities related to the Alberta System and the Canadian Mainline are deferred until they are recovered in tolls.

 

Derivative Financial Instruments  The Company utilizes derivative and other financial instruments to manage its exposure to changes in foreign currency exchange rates, interest rates and energy commodity prices. Gains or losses relating to derivatives that are hedges are deferred and recognized in the same period and in the same financial statement category as the corresponding hedged transactions. The recognition of gains and losses on derivatives used as hedges for Canadian Mainline, Alberta System, GTN and the Foothills System exposures is determined through the regulatory process.

 

A derivative must be designated and effective to be accounted for as a hedge. For cash flow hedges, effectiveness is achieved if the changes in the cash flows of the derivative substantially offset the changes in the cash flows of the hedged position and the timing of the cash flows is similar. Effectiveness for fair value hedges is achieved if changes in the fair value of the derivative substantially offset changes in the fair value attributable to the hedged item. In the event that a derivative does not meet the designation or effectiveness criterion, the derivative is accounted for at fair value and realized and unrealized gains and losses on the derivative are recognized in income. If a derivative that qualifies as a hedge is settled early, the gain or loss at settlement is deferred and recognized when the corresponding hedged transaction is recognized. Premiums paid or received with respect to derivatives that are hedges are deferred and amortized to income over the term of the hedge.

 

Employee Benefit and Other Plans  The Company sponsors defined benefit pension plans (DB Plans). The cost of defined benefit pensions and other post-employment benefits earned by employees is actuarially determined using the projected benefit method pro-rated on service and Management’s best estimate of expected plan investment performance, salary escalation, retirement ages of employees and expected health care costs. Pension plan assets are measured at fair value. The expected return on pension plan assets is determined using market-related values based on a five-year moving average value for all plan assets. Adjustments arising from plan amendments are amortized on a straight-line basis over the average remaining service period of employees active at the date of amendment. The excess of the net actuarial gain or loss over 10 per cent of the greater of the benefit obligation and the fair value of plan assets is amortized over the average remaining service period of the active employees. When the restructuring of a benefit plan gives rise to both a curtailment and a settlement, the curtailment is accounted for prior to the settlement. The Company previously sponsored two additional plans, a defined contribution plan and a combination of the defined benefit and defined contribution plans, which were effectively terminated at December 31, 2002.

 

75



 

The Company has broad-based, medium-term employee incentive plans, which grant units to each eligible employee. Under these plans, units vest when certain conditions are met, including the employee’s continued employment during a specified period and achievement of specified corporate performance targets. The units under one of these incentive plans vested at the end of 2004 and the Company recorded compensation expense over the three year vesting period. The value of units under this plan, net of income tax, will be paid in cash in 2005.

 

NOTE 2  Accounting Changes

 

Asset Retirement Obligations  Effective January 1, 2004, the Company adopted the new standard of the Canadian Institute of Chartered Accountants (CICA) Handbook Section “Asset Retirement Obligations”, which addresses financial accounting and reporting for obligations associated with asset retirement costs. This section requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value is added to the carrying amount of the associated asset. The liability is accreted at the end of each period through charges to operating expenses. This accounting change was applied retroactively with restatement of prior periods.

 

The plant, property and equipment of the regulated natural gas transmission operations consists primarily of underground pipelines and above ground compression equipment and other facilities. No amount has been recorded for asset retirement obligations relating to these assets as it is not possible to make a reasonable estimate of the fair value of the liability due to the indeterminate timing and scope of the asset retirements. Management believes it is reasonable to assume that all retirement costs associated with the regulated pipelines will be recovered through tolls in future periods. For Gas Transmission, excluding regulated natural gas transmission operations, the impact of this accounting change resulted in an increase of $2 million in plant, property and equipment and in the estimated fair value of the liability as at January 1, 2003 and December 31, 2003.

 

The plant, property and equipment in the Power business consists primarily of power plants in Canada and the U.S. The impact of this accounting change resulted in an increase of $6 million and $7 million in plant, property and equipment and in the estimated fair value of the liability as at January 1, 2003 and December 31, 2003, respectively. The asset retirement cost, net of accumulated depreciation that would have been recorded if the cost had been recorded in the period in which it arose, is recorded as an additional cost of the assets as at January 1, 2003.

 

The impact of this change on TransCanada’s net income in prior years was nil.  The impact of this accounting change on the Company’s financial statements as at and for the year ended December 31, 2004 is disclosed in Note 17.

 

Hedging Relationships  Effective January 1, 2004, the Company adopted the provisions of the CICA’s new Accounting Guideline “Hedging Relationships” that specifies the circumstances in which hedge accounting is appropriate, including the identification, documentation, designation and effectiveness of hedges, and the discontinuance of hedge accounting. The adoption of the new guideline, which TransCanada applied prospectively, had no significant impact on net income for the year ended December 31, 2004.

 

Generally Accepted Accounting Principles  Effective January 1, 2004, the Company adopted the new standard of the CICA Handbook Section “Generally Accepted Accounting Principles” that defines primary sources of GAAP and the other sources that need to be considered in the application of GAAP. The new standard eliminates the ability to rely on industry practice to support a particular accounting policy and provides an exemption for rate-regulated operations.

 

This accounting change was applied prospectively and there was no impact on net income in the year ended December 31, 2004. In prior years, in accordance with industry practice, certain assets and liabilities related to the Company’s regulated activities, and offsetting deferral accounts, were not recognized on the balance sheet. The impact of the change on the consolidated balance sheet as at January 1, 2004 is as follows.

 

(millions of dollars)

 

Increase/(Decrease)

 

 

 

 

 

Other assets

 

153

 

 

 

 

 

Deferred amounts

 

80

 

Long-term debt

 

76

 

Preferred securities

 

(3

)

Total liabilities

 

153

 

 

76



 

NOTE 3  Segmented Information

 

Net Income/(Loss) (1)

 

Year ended December 31, 2004 (millions of dollars)

 

Gas
Transmission

 

Power

 

Corporate

 

Total

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

3,917

 

1,190

 

 

5,107

 

Cost of sales (2)

 

 

(539

)

 

(539

)

Other costs and expenses

 

(1,225

)

(407

)

(3

)

(1,635

)

Depreciation

 

(873

)

(72

)

 

(945

)

Operating income/(loss)

 

1,819

 

172

 

(3

)

1,988

 

Financial charges and non-controlling interests

 

(785

)

(9

)

(79

)

(873

)

Financial charges of joint ventures

 

(56

)

(4

)

 

(60

)

Equity income

 

41

 

130

 

 

171

 

Interest income and other

 

14

 

14

 

37

 

65

 

Gains related to Power LP

 

 

197

 

 

197

 

Income taxes

 

(447

)

(104

)

43

 

(508

)

Continuing operations

 

586

 

396

 

(2

)

980

 

Discontinued operations

 

 

 

 

 

 

 

52

 

Net Income

 

 

 

 

 

 

 

1,032

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2003 (millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

3,956

 

1,401

 

 

5,357

 

Cost of sales (2)

 

 

(692

)

 

(692

)

Other costs and expenses

 

(1,270

)

(405

)

(7

)

(1,682

)

Depreciation

 

(831

)

(82

)

(1

)

(914

)

Operating income/(loss)

 

1,855

 

222

 

(8

)

2,069

 

Financial charges and non-controlling interests

 

(781

)

(11

)

(89

)

(881

)

Financial charges of joint ventures

 

(76

)

(1

)

 

(77

)

Equity income

 

66

 

99

 

 

165

 

Interest income and other

 

17

 

14

 

29

 

60

 

Income taxes

 

(459

)

(103

)

27

 

(535

)

Continuing operations

 

622

 

220

 

(41

)

801

 

Discontinued operations

 

 

 

 

 

 

 

50

 

Net Income

 

 

 

 

 

 

 

851

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2002 (millions of dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

3,921

 

1,293

 

 

5,214

 

Cost of sales (2)

 

 

(627

)

 

(627

)

Other costs and expenses

 

(1,166

)

(371

)

(9

)

(1,546

)

Depreciation

 

(783

)

(65

)

 

(848

)

Operating income/(loss)

 

1,972

 

230

 

(9

)

2,193

 

Financial charges and non-controlling interests

 

(821

)

(13

)

(91

)

(925

)

Financial charges of joint ventures

 

(90

)

 

 

(90

)

Equity income

 

33

 

 

 

33

 

Interest income and other

 

17

 

13

 

23

 

53

 

Income taxes

 

(458

)

(84

)

25

 

(517

)

Continuing operations

 

653

 

146

 

(52

)

747

 

Discontinued operations

 

 

 

 

 

 

 

 

Net Income

 

 

 

 

 

 

 

747

 

 


(1)     In determining the net income of each segment, certain expenses such as indirect financial charges and related income taxes are not allocated to business segments.

(2)     Cost of sales is comprised of commodity purchases for resale.

 

77



 

 

Total Assets

 

December 31 (millions of dollars)

 

2004

 

2003

 

 

 

 

 

 

 

Gas Transmission

 

18,428

 

17,064

 

Power

 

2,802

 

2,753

 

Corporate

 

893

 

873

 

Continuing operations

 

22,123

 

20,690

 

Discontinued operations

 

7

 

11

 

 

 

22,130

 

20,701

 

 

Geographic Information

 

Year ended December 31 (millions of dollars)

 

2004

 

2003

 

2002 (4)

 

 

 

 

 

 

 

 

 

Revenues (3)

 

 

 

 

 

 

 

Canada – domestic

 

3,147

 

3,257

 

2,731

 

Canada – export

 

1,261

 

1,293

 

1,641

 

United States

 

699

 

807

 

842

 

 

 

5,107

 

5,357

 

5,214

 

 


(3)   Revenues are attributed to countries based on country of origin of product or service.

(4)   Canada – domestic revenues were reduced in 2002 as a result of transportation service credits of $662 million. These services were discontinued in 2003.

 

Plant, Property and Equipment

 

December 31 (millions of dollars)

 

2004

 

2003

 

 

 

 

 

 

 

Canada

 

14,757

 

15,156

 

United States

 

3,947

 

2,259

 

 

 

18,704

 

17,415

 

 

Capital Expenditures

 

Year ended December 31 (millions of dollars)

 

2004

 

2003

 

2002

 

 

 

 

 

 

 

 

 

Gas Transmission

 

187

 

256

 

382

 

Power

 

285

 

132

 

193

 

Corporate and Other

 

4

 

3

 

24

 

 

 

476

 

391

 

599

 

 

78



 

NOTE 4  Plant, Property and Equipment

 

 

 

2004

 

2003

 

December 31 (millions of dollars)

 

Cost

 

Accumulated
Depreciation

 

Net
Book Value

 

Cost

 

Accumulated
Depreciation

 

Net
Book Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gas Transmission

 

 

 

 

 

 

 

 

 

 

 

 

 

Canadian Mainline

 

 

 

 

 

 

 

 

 

 

 

 

 

Pipeline

 

8,695

 

3,421

 

5,274

 

8,683

 

3,176

 

5,507

 

Compression

 

3,322

 

947

 

2,375

 

3,318

 

832

 

2,486

 

Metering and other

 

366

 

125

 

241

 

404

 

132

 

272

 

 

 

12,383

 

4,493

 

7,890

 

12,405

 

4,140

 

8,265

 

Under construction

 

16

 

 

16

 

12

 

 

12

 

 

 

12,399

 

4,493

 

7,906

 

12,417

 

4,140

 

8,277

 

Alberta System

 

 

 

 

 

 

 

 

 

 

 

 

 

Pipeline

 

4,978

 

2,055

 

2,923

 

4,934

 

1,908

 

3,026

 

Compression

 

1,496

 

599

 

897

 

1,507

 

549

 

958

 

Metering and other

 

861

 

262

 

599

 

862

 

211

 

651

 

 

 

7,335

 

2,916

 

4,419

 

7,303

 

2,668

 

4,635

 

Under construction

 

20

 

 

20

 

13

 

 

13

 

 

 

7,355

 

2,916

 

4,439

 

7,316

 

2,668

 

4,648

 

GTN (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Pipeline

 

1,131

 

9

 

1,122

 

 

 

 

 

 

 

Compression

 

726

 

2

 

724

 

 

 

 

 

 

 

Metering and other

 

187

 

1

 

186

 

 

 

 

 

 

 

 

 

2,044

 

12

 

2,032

 

 

 

 

 

 

 

Under construction

 

17

 

 

17

 

 

 

 

 

 

 

 

 

2,061

 

12

 

2,049

 

 

 

 

 

 

 

Foothills System

 

 

 

 

 

 

 

 

 

 

 

 

 

Pipeline

 

815

 

346

 

469

 

834

 

317

 

517

 

Compression

 

373

 

114

 

259

 

378

 

99

 

279

 

Metering and other

 

78

 

35

 

43

 

60

 

35

 

25

 

 

 

1,266

 

495

 

771

 

1,272

 

451

 

821

 

Joint Ventures and other

 

3,213

 

1,053

 

2,160

 

3,361

 

1,052

 

2,309

 

 

 

26,294

 

8,969

 

17,325

 

24,366

 

8,311

 

16,055

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Power (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

Power generation facilities

 

1,397

 

375

 

1,022

 

1,439

 

381

 

1,058

 

Other

 

77

 

45

 

32

 

84

 

41

 

43

 

 

 

1,474

 

420

 

1,054

 

1,523

 

422

 

1,101

 

Under construction

 

288

 

 

288

 

209

 

 

209

 

 

 

1,762

 

420

 

1,342

 

1,732

 

422

 

1,310

 

Corporate

 

124

 

87

 

37

 

122

 

72

 

50

 

 

 

28,180

 

9,476

 

18,704

 

26,220

 

8,805

 

17,415

 

 


(1)     TransCanada acquired GTN on November 1, 2004.

(2)     Certain Power generation facilities are accounted for as assets under operating leases. At December 31, 2004, the net book value of these facilities was $70 million. Revenues of $7 million were attributed to the PPAs of these facilities in 2004.

 

79



 

NOTE 5  Other Assets

 

December 31 (millions of dollars)

 

2004

 

2003

 

 

 

 

 

 

 

Derivative contracts

 

253

 

118

 

PPAs – Canada (1)

 

274

 

278

 

PPAs – U.S. (1)

 

98

 

248

 

Pension and other benefit plans

 

209

 

201

 

Regulatory deferrals

 

199

 

212

 

Loans and advances (2)

 

135

 

111

 

Goodwill

 

58

 

 

Other

 

251

 

189

 

 

 

1,477

 

1,357

 

 


(1)     The following amounts related to the PPAs are included in the consolidated financial statements.

 

 

 

2004

 

2003

 

December 31 (millions of dollars)

 

Cost

 

Accumulated
Amortization

 

Net
Book Value

 

Cost

 

Accumulated
Amortization

 

Net
Book Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PPAs – Canada

 

345

 

71

 

274

 

329

 

51

 

278

 

PPAs – U.S.

 

102

 

4

 

98

 

276

 

28

 

248

 

 

The aggregate amortization expense with respect to the PPAs was $24 million for the year ended December 31, 2004 (2003 – $37 million; 2002 – $28 million). The amortization expense with respect to the Company’s PPAs approximate: 2005 – $26 million; 2006 – $26 million; 2007 – $26 million; 2008 – $26 million; and 2009 – $26 million. In April 2004, the Company disposed of all its PPAs – U.S. to Power LP and, as a result of its joint venture investment in Power LP, recorded US$74 million of PPAs – U.S. In 2004, TransCanada also recorded $16 million of PPAs – Canada.

 


(2)   Includes a $75 million unsecured note receivable from Bruce Power L.P. (Bruce Power) bearing interest at 10.5 per cent per annum, due February 14, 2008.

 

NOTE 6 Joint Venture Investments

 

 

 

 

 

TransCanada’s Proportionate Share

 

 

 

 

 

Income Before Income Taxes
Year ended December 31

 

Net Assets
December 31

 

(millions of dollars)

 

Ownership Interest

 

2004

 

2003

 

2002

 

2004

 

2003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gas Transmission

 

 

 

 

 

 

 

 

 

 

 

 

 

Great Lakes

 

50.0

%(1)

86

 

81

 

102

 

379

 

419

 

Iroquois

 

41.0

%(1)

28

 

31

 

30

 

175

 

169

 

TC PipeLines, LP

 

33.4

%

22

 

21

 

24

 

124

 

130

 

Trans Québec & Maritimes

 

50.0

%

13

 

14

 

13

 

75

 

77

 

CrossAlta

 

60.0

%(1)

20

 

11

 

21

 

24

 

25

 

Foothills

 

 

   (2)

 

19

 

29

 

 

 

Other

 

Various

 

6

 

7

 

7

 

27

 

22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Power

 

 

 

 

 

 

 

 

 

 

 

 

 

Power LP

 

30.6

%(3)

32

 

25

 

26

 

289

 

234

 

ASTC Power Partnership

 

50.0

%(4)

 

 

 

93

 

99

 

 

 

 

 

207

 

209

 

252

 

1,186

 

1,175

 

 


(1)     Great Lakes Gas Transmission Limited Partnership (Great Lakes); Iroquois Gas Transmission System, L.P. (Iroquois); CrossAlta Gas Storage & Services Ltd. (CrossAlta).

(2)     In August 2003, the Company acquired the remaining interests in Foothills previously not held by TransCanada, and Foothills was consolidated subsequent to that date.

(3)     In April 2004, the Company’s interest in Power LP decreased to 30.6 per cent from 35.6 per cent.

(4)     The Company has a 50.0 per cent ownership interest in ASTC Power Partnership, which is located in Alberta and holds a PPA. The underlying power volumes related to the 50.0 per cent ownership interest in the Partnership are effectively transferred to TransCanada.

 

Consolidated retained earnings at December 31, 2004 include undistributed earnings from these joint ventures of $509 million (2003 – $509 million).

 

80



 

Summarized Financial Information of Joint Ventures

 

Year ended December 31 (millions of dollars)

 

2004

 

2003

 

2002

 

 

 

 

 

 

 

 

 

Income

 

 

 

 

 

 

 

Revenues

 

559

 

623

 

680

 

Other costs and expenses

 

(238

)

(275

)

(251

)

Depreciation

 

(88

)

(96

)

(119

)

Financial charges and other

 

(26

)

(43

)

(58

)

Proportionate share of income before income taxes of joint ventures

 

207

 

209

 

252

 

 

 

 

 

 

 

 

 

Year ended December 31 (millions of dollars)

 

2004

 

2003

 

2002

 

 

 

 

 

 

 

 

 

Cash Flows

 

 

 

 

 

 

 

Operations

 

269

 

272

 

323

 

Investing activities

 

(179

)

(114

)

(124

)

Financing activities

 

(76

)

(156

)

(210

)

Effect of foreign exchange rate changes on cash and short-term investments

 

(5

)

(10

)

(1

)

Proportionate share of increase/(decrease) in cash and short-term investments of joint ventures

 

9

 

(8

)

(12

)

 

 

 

 

 

 

 

 

December 31 (millions of dollars)

 

2004

 

2003

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet

 

 

 

 

 

 

 

Cash and short-term investments

 

64

 

55

 

 

 

Other current assets

 

133

 

106

 

 

 

Long-term investments

 

105

 

118

 

 

 

Plant, property and equipment

 

1,644

 

1,693

 

 

 

Other assets and deferred amounts (net)

 

221

 

109

 

 

 

Current liabilities

 

(153

)

(94

)

 

 

Non-recourse debt

 

(779

)

(761

)

 

 

Future income taxes

 

(49

)

(51

)

 

 

Proportionate share of net assets of joint ventures

 

1,186

 

1,175

 

 

 

 

81



 

NOTE 7  Long-Term Investments

 

 

 

 

 

TransCanada’s Share

 

 

 

 

 

Distributions From
Equity Investments
Year ended December 31

 

Income From
Equity Investments
Year ended December 31

 

Equity Investments
December 31

 

(millions of dollars)

 

Ownership Interest

 

2004

 

2003

 

2002

 

2004

 

2003

 

2002

 

2004

 

2003

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Power

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bruce Power

 

31.6

%

 

 

 

130

 

99

 

 

642

 

513

 

Gas Transmission

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Northern Border

 

10.0

%(1)

27

 

22

 

26

 

23

 

22

 

25

 

91

 

103

 

TransGas de Occidente S.A.

 

46.5

%

8

 

8

 

 

11

 

27

 

5

 

78

 

80

 

Portland

 

61.7

%(2)

 

10

 

 

 

14

 

2

 

 

 

Other

 

Various

 

13

 

6

 

1

 

7

 

3

 

1

 

29

 

37

 

 

 

 

 

48

 

46

 

27

 

171

 

165

 

33

 

840

 

733

 

 


(1)     The Northern Border equity investment effective ownership interest of 10.0 per cent is the result of the Company holding a 33.4 per cent interest in TC PipeLines, LP, which holds a 30.0 per cent interest in Northern Border Pipeline Company (Northern Border).

(2)     In September 2003, the Company increased its ownership interest in Portland to 43.4 per cent from 33.3 per cent. In December 2003, the Company increased its ownership interest to 61.7 per cent and the investment was fully consolidated subsequent to that date.

 

Consolidated retained earnings at December 31, 2004 include undistributed earnings from these equity investments of $285 million (2003 – $166 million).

 

NOTE 8  Acquisitions and Dispositions

 

Acquisitions

 

GTN  On November 1, 2004, TransCanada acquired GTN for approximately US$1,730 million, including US$528 million of assumed debt and closing adjustments. The purchase price was allocated on a preliminary basis as follows using an estimate of fair values of the net assets at the date of acquisition.

 

Purchase Price Allocation

 

(millions of U.S. dollars)

 

 

 

 

 

 

 

Current assets

 

45

 

Plant, property and equipment

 

1,712

 

Other non-current assets

 

30

 

Goodwill

 

48

 

Current liabilities

 

(54

)

Long-term debt

 

(528

)

Other non-current liabilities

 

(51

)

 

 

1,202

 

 

Goodwill, which is attributable to the North Baja System, will be re-evaluated on an annual basis for impairment. Factors that contributed to goodwill include opportunities for expansion, a strong competitive position, strong demand for gas in the western markets and access to an ample supply of relatively low-cost gas. The goodwill recognized on this transaction is expected to be fully deductible for tax purposes.

 

The acquisition was accounted for using the purchase method of accounting. The financial results of GTN have been consolidated with those of TransCanada subsequent to the acquisition date and included in the Gas Transmission segment.

 

82



 

Bruce Power  On February 14, 2003, the Company acquired a 31.6 per cent interest in 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. The resulting note receivable from Bruce Power is recorded in other assets.

 

The purchase price of the Company’s 31.6 per cent interest in Bruce Power was allocated as follows.

 

Purchase Price Allocation

 

(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 of $301 million to the capital lease of the Bruce Power plant which is being amortized on a straight-line 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 is being 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.

 

Dispositions

 

Power LP  On April 30, 2004, TransCanada sold the ManChief and Curtis Palmer power facilities to Power LP for US$402.6 million, plus closing adjustments of US$12.8 million, and recognized a gain of $25 million pre tax ($15 million after tax). Power LP funded the purchase through an issue of 8.1 million subscription receipts and third party debt. As part of the subscription receipts offering, TransCanada purchased 540,000 subscription receipts for an aggregate purchase price of $20 million. The subscription receipts were subsequently converted into partnership units. The net impact of this issue reduced TransCanada’s ownership interest in Power LP to 30.6 per cent from 35.6 per cent.

 

At a special meeting held on April 29, 2004, Power LP’s unitholders approved an amendment to the terms of the Power LP Partnership Agreement to remove Power LP’s obligation to redeem all units not owned by TransCanada at June 30, 2017. TransCanada was required to fund this redemption, thus the removal of Power LP’s obligation eliminates this requirement. The removal of the obligation and the reduction in TransCanada’s ownership interest in Power LP resulted in a gain of $172 million. This amount includes the recognition of unamortized gains of $132 million on previous Power LP transactions.

 

83



 

NOTE 9  Long-Term Debt

 

 

 

 

 

2004

 

2003

 

 

 

Maturity
Dates

 

Outstanding
December 31 (1)

 

Weighted
Average
Interest
Rate (2)

 

Outstanding
December 31 (1)

 

Weighted
Average
Interest
Rate (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

Canadian Mainline (3)

 

 

 

 

 

 

 

 

 

 

 

First Mortgage Pipe Line Bonds

 

 

 

 

 

 

 

 

 

 

 

Pounds Sterling (2004 and 2003 – £25)

 

2007

 

58

 

16.5

%

58

 

16.5

%

Debentures

 

 

 

 

 

 

 

 

 

 

 

Canadian dollars

 

2008 to 2020

 

1,354

 

10.9

%

1,354

 

10.9

%

U.S. dollars (2004 – US$600; 2003 – US$800)

 

2012 to 2021

 

722

 

9.5

%

1,034

 

9.2

%

Medium-Term Notes

 

 

 

 

 

 

 

 

 

 

 

Canadian dollars

 

2005 to 2031

 

2,167

 

6.9

%

2,312

 

6.9

%

U.S. dollars (2004 and 2003 – US$120)

 

2010

 

144

 

6.1

%

155

 

6.1

%

Foreign exchange differential recoverable through the tollmaking process (8)

 

 

 

 

 

 

(60

)

 

 

 

 

 

 

4,445

 

 

 

4,853

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alberta System (4)

 

 

 

 

 

 

 

 

 

 

 

Debentures and Notes

 

 

 

 

 

 

 

 

 

 

 

Canadian dollars

 

2007 to 2024

 

607

 

11.6

%

627

 

11.6

%

U.S. dollars (2004 – US$375; 2003 – US$500)

 

2012 to 2023

 

451

 

8.2

%

646

 

8.3

%

Medium-Term Notes

 

 

 

 

 

 

 

 

 

 

 

Canadian dollars

 

2005 to 2030

 

767

 

7.4

%

767

 

7.4

%

U.S. dollars (2004 and 2003 – US$233)

 

2026 to 2029

 

280

 

7.7

%

301

 

7.7

%

Foreign exchange differential recoverable through the tollmaking process (8)

 

 

 

 

 

 

(16

)

 

 

 

 

 

 

2,105

 

 

 

2,325

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GTN (5)

 

 

 

 

 

 

 

 

 

 

 

Unsecured Debentures and Notes (2004 – US$525)

 

2005 to 2025

 

632

 

7.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foothills System (3)

 

 

 

 

 

 

 

 

 

 

 

Senior Secured Notes

 

 

 

 

 

 

80

 

4.3

%

Senior Unsecured Notes

 

2009 to 2014

 

400

 

4.9

%

300

 

4.7

%

 

 

 

 

400

 

 

 

380

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portland (6)

 

 

 

 

 

 

 

 

 

 

 

Senior Secured Notes

 

 

 

 

 

 

 

 

 

 

 

U.S. dollars (2004 – US$256; 2003 – US$271)

 

2018

 

308

 

5.9

%

350

 

5.9

%

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Medium-Term Notes (3)

 

 

 

 

 

 

 

 

 

 

 

Canadian dollars

 

2005 to 2030

 

592

 

6.2

%

592

 

6.2

%

U.S. dollars (2004 – US$521; 2003 – US$665)

 

2006 to 2025

 

627

 

6.9

%

859

 

6.8

%

Subordinated Debentures (3)

 

 

 

 

 

 

 

 

 

 

 

U.S. dollars (2004 and 2003 – US$57)

 

2006

 

68

 

9.1

%

74

 

9.1

%

Unsecured Loans, Debentures and Notes (7)

 

 

 

 

 

 

 

 

 

 

 

U.S. dollars (2004 – US$1,082; 2003 – US$446)

 

2005 to 2034

 

1,302

 

5.1

%

582

 

4.9

%

 

 

 

 

2,589

 

 

 

2,107

 

 

 

 

 

 

 

10,479

 

 

 

10,015

 

 

 

Less: Current Portion of Long-Term Debt