exhibit13207312008.htm

(unaudited)	Three months ended June 30						Six months ended June 30
(millions of dollars except per share amounts)	2008			2007			2008			2007
Revenues		2,017			2,208			4,150			4,452

Operating Expenses
Plant operating costs and other		733			761			1,431			1,493
Commodity purchases resold		347			523			757			1,094
Depreciation		301			300			597			590
		1,381			1,584			2,785			3,177
		636			624			1,365			1,275
Other Expenses/(Income)
Financial charges		186			264			404			501
Financial charges of joint ventures		17			19			33			40
Interest income and other		(34	)		(48	)		(73	)		(79	)
Calpine bankruptcy settlements		-			-			(279	)		-
Writedown of Broadwater LNG project costs		-			-			41			-
		169			235			126			462

Income before Income Taxes and Non-Controlling Interests		467			389			1,239			813
Income Taxes
Current		105			96			352			264
Future		21			16			26			(21	)
		126			112			378			243

Non-Controlling Interests
Preferred share dividends of subsidiary		5			5			11			11
Non-controlling interest in PipeLines LP		13			14			34			31
Other		(1	)		1			43			6
		17			20			88			48
Net Income		324			257			773			522

Net Income Per Share
Basic and Diluted	$	0.58		$	0.48		$	1.40		$	1.00

Average Shares Outstanding - Basic (millions)		561			536			551			522
Average Shares Outstanding - Diluted (millions)		563			538			553			525

See accompanying notes to the consolidated financial statements.

(unaudited)	Three months ended June 30						Six months ended June 30
(millions of dollars)	2008			2007			2008			2007

Cash Generated From Operations
Net income		324			257			773			522
Depreciation		301			300			597			590
Future income taxes		21			16			26			(21	)
Non-controlling interests		17			20			88			48
Employee future benefits funding (in excess of)/ lower than
expense		(7	)		3			13			15
Writedown of Broadwater LNG project costs		-			-			41			-
Other		20			-			60			24
		676			596			1,598			1,178
(Increase)/decrease in operating working capital		(104	)		93			(98	)		129
Net cash provided by operations		572			689			1,500			1,307
Investing Activities
Capital expenditures		(633	)		(386	)		(1,093	)		(692	)
Acquisitions, net of cash acquired		(2	)		(4	)		(4	)		(4,224	)
Deferred amounts and other		(13	)		(42	)		99			(148	)
Net cash used in investing activities		(648	)		(432	)		(998	)		(5,064	)

Financing Activities
Dividends on common shares		(137	)		(131	)		(267	)		(287	)
Distributions paid to non-controlling interests		(65	)		(29	)		(86	)		(45	)
Notes payable issued/(repaid), net		754			(804	)		724			261
Long-term debt issued		-			89			112			1,451
Reduction of long-term debt		(379	)		(470	)		(773	)		(795	)
Long-term debt of joint ventures issued		17			98			34			110
Reduction of long-term debt of joint ventures		(28	)		(107	)		(57	)		(119	)
Common shares issued, net of issue costs		1,237			7			1,246			1,697
Junior subordinated notes issued		-			1,107			-			1,107
Partnership units of subsidiary issued		-			-			-			348
Net cash provided by/(used in) financing activities		1,399			(240	)		933			3,728

Effect of Foreign Exchange Rate Changes on Cash
and Cash Equivalents		(3	)		(27	)		20			(30	)

Increase /(Decrease) in Cash and Cash Equivalents		1,320			(10	)		1,455			(59	)

Cash and Cash Equivalents
Beginning of period		639			350			504			399

Cash and Cash Equivalents
End of period		1,959			340			1,959			340

Supplementary Cash Flow Information
Income taxes paid		312			125			479			212
Interest paid		277			269			481			542

See accompanying notes to the consolidated financial statements.

(unaudited)	June 30,	December 31,
(millions of dollars)	2008	2007
ASSETS
Current Assets
Cash and cash equivalents	1,959	504
Accounts receivable	1,145	1,116
Inventories	549	497
Other	401	188
	4,054	2,305
Plant, Property and Equipment	24,149	23,452
Goodwill	2,813	2,633
Other Assets	1,839	1,940
	32,855	30,330

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable	1,133	421
Accounts payable and accrued liabilities	1,989	1,767
Accrued interest	252	261
Current portion of long-term debt	537	556
Current portion of long-term debt of joint ventures	30	30
	3,941	3,035
Deferred Amounts	1,283	1,107
Future Income Taxes	1,195	1,179
Long-Term Debt	11,945	12,377
Long-Term Debt of Joint Ventures	875	873
Junior Subordinated Notes	1,006	975
	20,245	19,546
Non-Controlling Interests
Non-controlling interest in PipeLines LP	603	539
Preferred shares of subsidiary	389	389
Other	73	71
	1,065	999
Shareholders' Equity	11,545	9,785
	32,855	30,330

See accompanying notes to the consolidated financial statements.

(unaudited)	Three months ended June 30						Six months ended June 30
(millions of dollars)	2008			2007			2008			2007
Net Income		324			257			773			522
Other Comprehensive Income/(Loss), Net of Income Taxes
Change in foreign currency translation gains and losses on
investments in foreign operations (1)		(14	)		(184	)		39			(221	)
Change in gains and losses on hedges of investments
in foreign operations (2)		17			46			(24	)		55
Change in gains and losses on derivative instruments
designated as cash flow hedges (3)		29			(36	)		33			(37	)
Reclassification to net income of gains and losses on derivative
instruments designated as cash flow hedges pertaining to
prior periods (4)		1			23			(18	)		20
Other Comprehensive Income/(Loss)		33			(151	)		30			(183	)
Comprehensive Income		357			106			803			339

(1) Net of income tax expense of $5 million and recovery of $20 million for the three months and six months ended June 30, 2008, respectively (2007 - $51 and $56 million expense, respectively).
(2) Net of income tax expense of $8 million and recovery of $14 million for the three months and six months ended June 30, 2008, respectively (2007 - $23 and $28 million expense, respectively).
(3) Net of income tax expense of $37 million and $49 million for the three months and six months ended June 30, 2008, respectively (2007 - $15 million and $10 million recovery, respectively).
(4) Net of income tax recovery of $2 million and $11 million for the three months and six months ended June 30, 2008, respectively (2007 - $7 million and $5 million expense, respectively).

See accompanying notes to the consolidated financial statements.

TRANSCANADA [31

SECOND QUARTER REPORT 2008

(unaudited) (millions of dollars)	Currency Translation Adjustment			Cash Flow Hedges			Total
Balance at December 31, 2007		(361	)		(12	)		(373	)
Change in foreign currency translation gains and losses on investments in
foreign operations (1)		39			-			39
Change in gains and losses on hedges of investments in foreign operations (2)		(24	)		-			(24	)
Change in gains and losses on derivative instruments designated as cash flow
hedges (3)		-			33			33
Reclassification to net income of gains and losses on derivative instruments
designated as cash flow hedges pertaining to prior periods (4)(5)		-			(18	)		(18	)
Balance at June 30, 2008		(346	)		3			(343	)

Balance at December 31, 2006		(90	)		-			(90	)
Transition adjustment resulting from adopting new financial instruments standards (6)		-			(96	)		(96	)
Change in foreign currency translation gains and losses on investments in
foreign operations (1)		(221	)		-			(221	)
Change in gains and losses on hedges of investments in foreign operations (2)		55			-			55
Change in gains and losses on derivative instruments designated as cash flow
hedges (3)		-			(37	)		(37	)
Reclassification to net income of gains and losses on derivative instruments
designated as cash flow hedges pertaining to prior periods (4)		-			20			20
Balance at June 30, 2007		(256	)		(113	)		(369	)

(1) Net of income tax recovery of $20 million for the six months ended June 30, 2008 (2007 - $56 million expense).
(2) Net of income tax recovery of $14 million for the six months ended June 30, 2008 (2007 - $28 million expense).
(3) Net of income tax expense of $49 million for the six months ended June 30, 2008 (2007 - $10 million recovery).
(4) Net of income tax recovery of $11 million for the six months ended June 30, 2008 (2007 - $5 million expense).
(5) The amount of gains and losses related to cash flow hedges reported in accumulated other comprehensive income that will be reclassified to net income in the next 12 months is estimated to be net gains of $10 million ($7 million net losses, net of tax). These estimates assume constant gas and power prices, interest rates and foreign exchange rates over time, however, the actual amounts that will be reclassified will vary based on changes in these factors.
(6) Net of income tax expense of $44 million.

See accompanying notes to the consolidated financial statements.

(unaudited)	Six months ended June 30
(millions of dollars)	2008			2007
Common Shares
Balance at beginning of period		6,662			4,794
Shares issued under dividend reinvestment plan		112			51
Proceeds from shares issued on exercise of stock options		11			14
Proceeds from shares issued under public offering, net of issue costs		1,235			1,683
Balance at end of period		8,020			6,542

Contributed Surplus
Balance at beginning of period		276			273
Issuance of stock options		2			2
Balance at end of period		278			275

Retained Earnings
Balance at beginning of period		3,220			2,724
Transition adjustment resulting from adopting new financial
instruments accounting standards		-			4
Net income		773			522
Common share dividends		(403	)		(358	)
Balance at end of period		3,590			2,892

Accumulated Other Comprehensive Income
Balance at beginning of period		(373	)		(90	)
Transition adjustment resulting from adopting new financial instruments standards		-			(96	)
Other comprehensive income		30			(183	)
Balance at end of period		(343	)		(369	)

Total Shareholders' Equity		11,545			9,340

See accompanying notes to the consolidated financial statements.

TRANSCANADA [33

SECOND QUARTER REPORT 2008

Notes to Consolidated Financial Statements

The consolidated financial statements of TransCanada Corporation (TransCanada or the Company) have been prepared in accordance with Canadian generally accepted accounting principles (GAAP). The accounting policies applied are consistent with those outlined in TransCanada's annual audited Consolidated Financial Statements for the year ended December 31, 2007. These Consolidated Financial Statements reflect all normal recurring adjustments that are, in the opinion of management, necessary to present fairly the financial position and results of operations for the respective periods. These Consolidated Financial Statements do not include all disclosures required in the annual financial statements and should be read in conjunction with the 2007 audited Consolidated Financial Statements included in TransCanada’s 2007 Annual Report. Amounts are stated in Canadian dollars unless otherwise indicated.

In Pipelines, which consists primarily of the Company's investments in regulated pipelines and regulated natural gas storage facilities, annual revenues and net income fluctuate over the long term based on regulators' decisions and negotiated settlements with shippers. Generally, quarter-over-quarter revenues and net income during any particular fiscal year remain relatively stable with fluctuations resulting from adjustments being recorded due to regulatory decisions and negotiated settlements with shippers, seasonal fluctuations in short-term throughput on U.S. pipelines, acquisitions and divestitures, and developments outside of the normal course of operations.

The Canadian Institute of Chartered Accountants’ Accounting Standards Board (AcSB) announced that Canadian publicly accountable enterprises are required to adopt International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), effective January 1, 2011. In June 2008, the Canadian Securities Administrators (CSA) proposed that Canadian public companies which are also SEC registrants, such as TransCanada, could retain the option to prepare their financial statements under U.S. GAAP instead of IFRS. TransCanada is currently assessing its option to adopt IFRS as of January 1, 2011 and the impact that such a conversion would have on its accounting systems and financial statements. TransCanada’s conversion planning includes an analysis of project structure and governance, resourcing and training, analysis of key GAAP differences and a phased approach to assess accounting policies under IFRS.

Three months ended June 30	Pipelines						Energy						Corporate						Total
(unaudited - millions of dollars)	2008			2007			2008			2007			2008			2007			2008			2007
Revenues		1,100			1,228			917			980			-			-			2,017			2,208
Plant operating costs and other		(415	)		(417	)		(316	)		(343	)		(2	)		(1	)		(733	)		(761	)
Commodity purchases resold		-			(65	)		(347	)		(458	)		-			-			(347	)		(523	)
Depreciation		(257	)		(260	)		(44	)		(40	)		-			-			(301	)		(300	)
		428			486			210			139			(2	)		(1	)		636			624
Financial charges and non-controlling interests		(169	)		(206	)		-			-			(34	)		(78	)		(203	)		(284	)
Financial charges of joint ventures		(11	)		(13	)		(6	)		(6	)		-			-			(17	)		(19	)
Interest income and other		15			16			3			3			16			29			34			48
Income taxes		(105	)		(117	)		(56	)		(42	)		35			47			(126	)		(112	)
Net Income		158			166			151			94			15			(3	)		324			257


Six months ended June 30	Pipelines						Energy						Corporate						Total
(unaudited - millions of dollars)	2008			2007			2008			2007			2008			2007			2008			2007
Revenues		2,276			2,352			1,874			2,100			-			-			4,150			4,452
Plant operating costs and other		(814	)		(800	)		(614	)		(690	)		(3	)		(3	)		(1,431	)		(1,493	)
Commodity purchases resold		-			(65	)		(757	)		(1,029	)		-			-			(757	)		(1,094	)
Depreciation		(511	)		(511	)		(86	)		(79	)		-			-			(597	)		(590	)
		951			976			417			302			(3	)		(3	)		1,365			1,275
Financial charges and non-controlling interests		(404	)		(423	)		-			1			(88	)		(127	)		(492	)		(549	)
Financial charges of joint ventures		(22	)		(29	)		(11	)		(11	)		-			-			(33	)		(40	)
Interest income and other		47			29			4			6			22			44			73			79
Calpine bankruptcy settlements		279			-			-			-			-			-			279			-
Writedown of Broadwater LNG project costs		-			-			(41	)		-			-			-			(41	)		-
Income taxes		(332	)		(232	)		(108	)		(98	)		62			87			(378	)		(243	)
Net Income		519			321			261			200			(7	)		1			773			522

Total Assets
(unaudited - millions of dollars)	June 30, 2008	December 31, 2007
Pipelines	22,510	22,024
Energy	7,698	7,037
Corporate	2,647	1,269
	32,855	30,330

On July 2, 2008, TransCanada filed a final short form base shelf prospectus with securities regulators in Canada and the U.S. to allow for the offering of up to $3.0 billion of common shares, preferred shares and/or subscription receipts in Canada and the U.S. until August 2010. The filing was done in normal course similar to the filing of debt shelf prospectuses in Canada and the U.S. so as to expedite access to the capital markets depending on TransCanada’s assessment of its requirements for funding and general market conditions. This new shelf prospectus replaces the previous $3.0 billion short form shelf prospectus filed in January 2007 under which the Company had issued approximately $3.0 billion of common shares.

On May 5, 2008, TransCanada entered into an agreement with a syndicate of underwriters under which the underwriters agreed to purchase 30,200,000 common shares from TransCanada and sell them to the public at a price of $36.50 each. The underwriters also fully exercised an over-allotment option which they were granted for an additional 4,530,000 common shares at the same price. The entire issue of the 34,730,000 common shares closed on May 13, 2008 and resulted in gross proceeds to TransCanada of approximately $1.27 billion. These proceeds will be used to partially fund acquisitions and capital projects of the Company, including the acquisition of Ravenswood and the construction of Keystone, and for general corporate purposes.

At June 30, 2008, $240 million of proprietary natural gas inventory held in storage was included in Inventories (December 31, 2007 - $190 million). Effective April 1, 2007, TransCanada began valuing its proprietary natural gas inventory at fair value, as measured by the one-month forward price for natural gas less selling costs. The Company did not have any proprietary natural gas inventory prior to April 1, 2007. The change in fair value of proprietary natural gas inventory in the three and six months ended June 30, 2008 resulted in net unrealized gains of $42 million and $102 million, respectively, which were recorded as an increase to Revenues and Inventory (three and six months ended June 30, 2007 - net unrealized losses of $23 million). The net change in fair value of natural gas forward purchase and sales contracts in the three and six months ended June 30, 2008 resulted in net unrealized losses of $30 million and $107 million, respectively (three and six months ended June 30, 2007 - net unrealized gains of $19 million and $16 million, respectively), which were included in Revenues.

Derivatives Hedging Net Investment in Foreign Operations
Asset/(Liability)
(unaudited)
(millions of dollars)	June 30, 2008				December 31, 2007
				Notional or				Notional or
	Fair			Principal	Fair			Principal
	Value(1)			Amount	Value(1)			Amount
Derivative financial instruments in hedging relationships
U.S. dollar cross-currency swaps
(maturing 2009 to 2014)		75		U.S. 1,050		77		U.S. 350
U.S. dollar forward foreign exchange contracts
(maturing 2008)		(5	)	U.S. 730		(4	)	U.S. 150
U.S. dollar options
(maturing 2008)		-		U.S. 100		3		U.S. 600

		70		U.S. 1,880		76		U.S. 1,100

(1) Fair values are equal to carrying values.

TRANSCANADA [37

SECOND QUARTER REPORT 2008

June 30, 2008
(all amounts in millions unless otherwise indicated)	Power		Natural Gas		Interest

Derivative Financial Instruments Held for Trading
Fair Values(1)
Assets	$	104	$	169	$	26
Liabilities	$	(103)	$	(258)	$	(26)
Notional Values
Volumes(2)
Purchases		2,955		48		-
Sales		3,301		65		-
Canadian dollars		-		-		857
U.S. dollars		-		-	U.S. 1,150
Unrealized (losses)/gains in the period(3)
Three months ended June 30, 2008	$	(3)	$	7	$	2
Six months ended June 30, 2008	$	(5)	$	(11)	$	(2)
Realized gains/(losses) in the period(3)
Three months ended June 30, 2008	$	7	$	(20)	$	7
Six months ended June 30, 2008	$	9	$	5	$	10
Maturity dates	2008-2014		2008-2010		2008-2018

Derivative Financial Instruments in Hedging Relationships(4)(5)
Fair Values(1)
Assets	$	250	$	80	$	3
Liabilities	$	(236)	$	-	$	(17)
Notional Values
Volumes(2)
Purchases		6,126		23		-
Sales		17,727		-		-
Canadian dollars		-		-		50
U.S. dollars		-		-		U.S. 925
Realized (losses)/gains in the period(3)
Three months ended June 30, 2008	$	(37)	$	11	$	(3)
Six months ended June 30, 2008	$	(38)	$	19	$	(2)
Maturity dates	2008-2014		2008-2011		2009-2013

(1) Fair value is equal to the carrying value of these derivatives.
(2) Volumes for power and natural gas derivatives are in gigawatt hours (Gwh) and billion cubic feet (Bcf), respectively.
(3) All realized and unrealized gains and losses are included in Net Income. Realized gains and losses are included in Net Income after the financial instrument has been settled.
(4) All hedging relationships are designated as cash flow hedges except for $2 million (December 31, 2007 - $2 million) of interest-rate derivative financial instruments designated as fair value hedges.

(5) Net Income for the three and six months ended June 30, 2008 included losses of $3 million and $4 million, respectively (three and six months ended June 30, 2007 - nil and $3 million gain, respectively) for the changes in fair value of power and natural gas cash flow hedges that were ineffective in offsetting the change in fair value of their related underlying positions. Net Income for the three and six months ended June 30, 2007 included nil and a $4 million loss, respectively, for the changes in fair value of an interest-rate cash flow hedge that was reclassified as a result of discontinuance of cash flow hedge accounting. Cash flow hedge accounting was discontinued when the anticipated transaction was not probable of occurring by the end of the originally specified time period. There were no gains or losses included in Net Income for the three and six months ended June 30, 2008 for discontinued cash flow hedges.

2007
(all amounts in millions unless otherwise indicated)	Power		Natural Gas		Interest
Derivative Financial Instruments Held for Trading

Fair Values(1)(4)
Assets	$	55	$	43	$	23
Liabilities	$	(44)	$	(19)	$	(18)
Notional Values(4)
Volumes(2)
Purchases		3,774		47		-
Sales		4,469		64		-
Canadian dollars		-		-		615
U.S. dollars		-		-		U.S. 550
Unrealized gains/(losses) in the period(3)
Three months ended June 30, 2007	$	5	$	1	$	(2)
Six months ended June 30, 2007	$	9	$	(16)	$	1
Realized (losses)/gains in the period(3)
Three months ended June 30, 2007	$	(3)	$	6	$	1
Six months ended June 30, 2007	$	(8)	$	18	$	1
Maturity dates (4)	2008 - 2012		2008 - 2010		2008 - 2016

Derivative Financial Instruments in Hedging Relationships(5)(6)
Fair Values(1)(4)
Assets	$	135	$	19	$	2
Liabilities	$	(104)	$	(7)	$	(16)
Notional Values(4)
Volumes(2)
Purchases		7,362		28		-
Sales		16,367		4		-
Canadian dollars		-		-		150
U.S. dollars		-		-		U.S. 875
Realized gains/(losses) in the period(3)
Three months ended June 30, 2007	$	16	$	(1)	$	1
Six months ended June 30, 2007	$	13	$	(3)	$	1
Maturity dates(4)	2008 - 2013		2008 - 2010		2008 - 2013

(1) Fair value is equal to the carrying value of these derivatives.
(2) Volumes for power and natural gas derivatives are in Gwh and Bcf, respectively.
(3) All realized and unrealized gains and losses are included in Net Income. Realized gains and losses are included in Net Income after the financial instrument has been settled.
(4) As at December 31, 2007.
(5) All hedging relationships are designated as cash flow hedges except for $2 million (December 31, 2007 - $2 million) of interest-rate derivative financial instruments designated as fair value hedges.
(6) Net Income for the three and six months ended June 30, 2008 included losses of $3 million and $4 million, respectively (three and six months ended June 30, 2007 - nil and $3 million gain, respectively) for the changes in fair value of power and natural gas cash flow hedges that were ineffective in offsetting the change in fair value of their related underlying positions. Net Income for the three and six months ended June 30, 2007 included nil and a $4 million loss, respectively, for the changes in fair value of an interest-rate cash flow hedge that was reclassified as a result of discontinuance of cash flow hedge accounting. Cash flow hedge accounting was discontinued when the anticipated transaction was not probable of occurring by the end of the originally specified time period. There were no gains or losses included in Net Income for the three and six months ended June 30, 2008 for discontinued cash flow hedges.

Three months ended June 30	Pension Benefit Plans						Other Benefit Plans
(unaudited - millions of dollars)	2008			2007			2008			2007
Current service cost		12			11			1			1
Interest cost		20			18			2			2
Expected return on plan assets		(23	)		(20	)		(1	)		(1	)
Amortization of transitional obligation related to											-
regulated business		-			-			1			-
Amortization of net actuarial loss		5			6			1			-
Amortization of past service costs		1			1			-			(1	)
Net benefit cost recognized		15			16			4			1


Six months ended June 30	Pension Benefit Plans						Other Benefit Plans
(unaudited - millions of dollars)	2008			2007			2008			2007
Current service cost		25			22			1			1
Interest cost		39			35			4			3
Expected return on plan assets		(46	)		(39	)		(1	)		(1	)
Amortization of transitional obligation related to
regulated business		-			-			1			1
Amortization of net actuarial loss		9			12			1			1
Amortization of past service costs		2			2			-			(1	)
Net benefit cost recognized		29			32			6			4

8.	Calpine Bankruptcy Settlements

Certain subsidiaries of Calpine Corporation (Calpine) filed for bankruptcy protection in both Canada and the U.S. in 2005. Gas Transmission Northwest Corporation (GTNC) and Portland reached agreements with Calpine for allowed unsecured claims in the Calpine bankruptcy. In February 2008, GTNC and Portland received initial distributions of 9.4 million shares and 6.1 million shares, respectively, which represented approximately 85 per cent of their agreed-for claims. These shares were subsequently sold into the open market and resulted in total pre-tax income of $279 million.

On April 3, 2008, the Ontario Court of Appeal dismissed an appeal filed by the Canadian Alliance of Pipeline Landowners’ Associations (CAPLA). CAPLA filed the appeal as a result of a decision by the Ontario Superior Court in November 2006 to dismiss CAPLA’s class action lawsuit against TransCanada and Enbridge Inc. for damages alleged to have arisen from the creation of a control zone within 30 metres of a pipeline pursuant to Section 112 of the National Energy Board Act. The Ontario Court of Appeal’s decision is final and binding as CAPLA did not seek any further appeal within the time frame allowed.