exhibit132tcc07282011q2.htm

(unaudited)	Three months ended June 30				Six months ended June 30
(millions of dollars except per share amounts)	2011		2010		2011		2010

Revenues	2,143		1,923		4,386		3,878

Operating and Other Expenses
Plant operating costs and other	822		764		1,581		1,511
Commodity purchases resold	185		216		462		472
Depreciation and amortization	379		341		749		684
	1,386		1,321		2,792		2,667

Financial Charges/(Income)
Interest expense	235		187		446		369
Interest expense of joint ventures	11		15		27		31
Interest income and other	(23	)	18		(56	)	(6	)
	223		220		417		394

Income before Income Taxes	534		382		1,177		817

Income Taxes Expense
Current	42		(199	)	146		(118	)
Future	97		264		171		284
	139		65		317		166

Net Income	395		317		860		651

Net Income Attributable to Non-Controlling Interests	28		22		64		53
Net Income Attributable to Controlling Interests	367		295		796		598
Preferred Share Dividends	14		10		28		17
Net Income Attributable to Common Shares	353		285		768		581

Net Income per Common Share
Basic and Diluted	$0.50		$0.41		$1.10		$0.84

Average Common Shares Outstanding – Basic (millions)	702		689		700		688
Average Common Shares Outstanding – Diluted (millions)	703		690		701		689

(unaudited)	Three months ended June 30				Six months ended June 30
(millions of dollars)	2011		2010		2011		2010

Net Income	395		317		860		651
Other Comprehensive (Loss)/Income, Net of Income Taxes
Change in foreign currency translation gains and losses on investments in foreign operations(1)	(30	)	227		(128	)	80
Change in gains and losses on financial derivatives to hedge the net investments in foreign operations(2)	23		(79	)	72		(20	)
Change in gains and losses on derivative instruments designated as cash flow hedges(3)	(41	)	(44	)	(92	)	(120	)
Reclassification to Net Income of gains and losses on derivative instruments designated as cash flow hedges pertaining to prior periods(4)	18		(5	)	62		(6	)
Other Comprehensive (Loss)/Income	(30	)	99		(86	)	(66	)
Comprehensive Income	365		416		774		585

Comprehensive Income Attributable to Non-Controlling Interests	33		20		72		50
Comprehensive Income Attributable to Controlling Interests	332		396		702		535
Preferred Share Dividends	14		10		28		17
Comprehensive Income Attributable to Common Shares	318		386		674		518

(unaudited)	Three months ended June 30					Six months ended June 30
(millions of dollars)		2011		2010		2011		2010

Cash Generated From Operations
Net income		395		317		860		651
Depreciation and amortization		379		341		749		684
Future income taxes		97		264		171		284
Employee future benefits funding less than/(in excess of) expense		3		(12	)	(8	)	(44	)
Other		18		25		39		83
		892		935		1,811		1,658
Decrease/(increase) in operating working capital		8		(310	)	98		(201	)
Net cash provided by operations		900		625		1,909		1,457

Investing Activities
Capital expenditures		(655	)	(992	)	(1,439	)	(2,268	)
Deferred amounts and other		5		7		10		(209	)
Net cash used in investing activities		(650	)	(985	)	(1,429	)	(2,477	)

Financing Activities
Dividends on common and preferred shares		(198	)	(195	)	(398	)	(383	)
Distributions paid to non-controlling interests		(27	)	(28	)	(54	)	(55	)
Notes payable repaid, net		(548	)	(441	)	(415	)	(9	)
Long-term debt issued, net of issue costs		519		1,306		519		1,316
Reduction of long-term debt		(419	)	(142	)	(740	)	(283	)
Long-term debt of joint ventures issued		31		70		31		78
Reduction of long-term debt of joint ventures		(38	)	(113	)	(49	)	(139	)
Common shares issued		4		5		25		14
Partnership units of subsidiary issued, net of issue costs		321		-		321		-
Preferred shares issued, net of issue costs		-		340		-		679
Net cash (used in)/provided by financing activities		(355	)	802		(760	)	1,218

Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalents		(3	)	33		(16	)	16

(Decrease)/Increase in Cash and Cash Equivalents		(108	)	475		(296	)	214

Cash and Cash Equivalents
Beginning of period		576		736		764		997

Cash and Cash Equivalents
End of period		468		1,211		468		1,211

Supplementary Cash Flow Information
Income taxes (refunded)/paid, including refunds		(47	)	39		41		43
Interest paid		232		119		485		358


(unaudited)
(millions of dollars)	June 30, 2011	December 31, 2010

ASSETS
Current Assets
Cash and cash equivalents	468	764
Accounts receivable	1,167	1,271
Inventories	427	425
Other	692	777
	2,754	3,237
Plant, Property and Equipment	36,234	36,244
Goodwill	3,461	3,570
Regulatory Assets	1,449	1,512
Intangibles and Other Assets	1,989	2,026
	45,887	46,589

LIABILITIES
Current Liabilities
Notes payable	1,628	2,092
Accounts payable	1,884	2,243
Accrued interest	347	367
Current portion of long-term debt	537	894
Current portion of long-term debt of joint ventures	159	65
	4,555	5,661
Regulatory Liabilities	340	314
Deferred Amounts	710	694
Future Income Taxes	3,357	3,222
Long-Term Debt	16,803	17,028
Long-Term Debt of Joint Ventures	680	801
Junior Subordinated Notes	955	985
	27,400	28,705
EQUITY
Controlling interests	17,071	16,727
Non-controlling interests	1,416	1,157
	18,487	17,884
	45,887	46,589

	Currency
(unaudited)	Translation		Cash Flow
(millions of dollars)	Adjustments		Hedges and Other		Total

Balance at December 31, 2010	(683	)	(194	)	(877	)
Change in foreign currency translation gains and losses on investments in foreign operations(1)	(128	)	-		(128	)
Change in gains and losses on financial derivatives to hedge the net investments in foreign operations(2)	72		-		72
Change in gains and losses on derivative instruments designated as cash flow hedges(3)	-		(95	)	(95	)
Reclassification to Net Income of gains and losses on derivative instruments designated as cash flow hedges pertaining to prior periods(4)(5)	-		57		57
Balance at June 30, 2011	(739	)	(232	)	(971	)




Balance at December 31, 2009	(592	)	(40	)	(632	)
Change in foreign currency translation gains and losses on investments in foreign operations(1)	80		-		80
Change in gains and losses on financial derivatives to hedge the net investments in foreign operations(2)	(20	)	-		(20	)
Changes in gains and losses on derivative instruments designated as cash flow hedges(3)	-		(121	)	(121	)
Reclassification to Net Income of gains and losses on derivative instruments designated as cash flow hedges pertaining to prior periods(4)	-		(2	)	(2	)
Balance at June 30, 2010	(532	)	(163	)	(695	)

(5)

Losses related to cash flow hedges reported in Accumulated Other Comprehensive (Loss)/Income and expected to be reclassified to Net Income in the next 12 months are estimated to be $103 million ($68 million, net of tax). These estimates assume constant commodity prices, interest rates and foreign exchange rates over time, however, the amounts reclassified will vary based on the actual value of these factors at the date of settlement.

(unaudited)	Six months ended June 30
(millions of dollars)	2011		2010

Common Shares
Balance at beginning of period	11,745		11,338
Shares issued under dividend reinvestment plan	202		170
Shares issued on exercise of stock options	26		14
Balance at end of period	11,973		11,522

Preferred Shares
Balance at beginning of period	1,224		539
Shares issued under public offering, net of issue costs	-		685
Balance at end of period	1,224		1,224

Contributed Surplus
Balance at beginning of period	331		328
Issuance of stock options, net of exercises	1		2
Dilution gain from PipeLines LP units issued	30		-
Balance at end of period	362		330

Retained Earnings
Balance at beginning of period	4,304		4,186
Net income attributable to controlling interests	796		598
Common share dividends	(589	)	(552	)
Preferred share dividends	(28	)	(17	)
Balance at end of period	4,483		4,215

Accumulated Other Comprehensive (Loss)/Income
Balance at beginning of period	(877	)	(632	)
Other comprehensive (loss)/income	(94	)	(63	)
Balance at end of period	(971	)	(695	)
	3,512		3,520

Equity Attributable to Controlling Interests	17,071		16,596

Equity Attributable to Non-Controlling Interests
Balance at beginning of period	1,157		1,174
Net income attributable to non-controlling interests
PipeLines LP	49		39
Preferred share dividends of subsidiary	11		11
Portland	4		3
Other comprehensive income/(loss) attributable to non-controlling interests	8		(3	)
Sale of PipeLines LP units
Proceeds, net of issue costs	321		-
Decrease in TransCanada’s ownership	(50	)	-
Distributions to non-controlling interests	(54	)	(55	)
Other	(30	)	17
Balance at end of period	1,416		1,186

Total Equity	18,487		17,782

The consolidated financial statements of TransCanada Corporation (TransCanada or the Company) have been prepared in accordance with Canadian generally accepted accounting principles (GAAP) as defined in Part V of the Canadian Institute of Chartered Accountants (CICA) Handbook, which is discussed further in Note 2. The accounting policies applied are consistent with those outlined in TransCanada's annual audited Consolidated Financial Statements for the year ended December 31, 2010. 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 2010 audited Consolidated Financial Statements included in TransCanada’s 2010 Annual Report. Unless otherwise indicated, “TransCanada“ or “the Company“ includes TransCanada Corporation and its subsidiaries. Capitalized and abbreviated terms that are used but not otherwise defined herein are identified in the Glossary of Terms contained in TransCanada’s 2010 Annual Report. Amounts are stated in Canadian dollars unless otherwise indicated.

In Natural Gas Pipelines, which consists primarily of the Company's investments in regulated natural gas 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 volumes on U.S. pipelines, acquisitions and divestitures, and developments outside of the normal course of operations.

In Oil Pipelines, which consists of the Company’s investment in the Keystone crude oil pipeline, annual revenues are based on contracted crude oil transportation and uncommitted spot transportation. Quarter-over-quarter revenues and net income during any particular fiscal year remain relatively stable with fluctuations resulting from planned and unplanned outages, and changes in the amount of spot volumes transported and the associated rate charged. Spot volumes transported are affected by customer demand, market pricing, planned and unplanned outages of refineries, terminals and pipeline facilities, and developments outside of the normal course of operations.

In Energy, which consists primarily of the Company’s investments in electrical power generation plants and non-regulated natural gas storage facilities, quarter-over-quarter revenues and net income are affected by seasonal weather conditions, customer demand, market prices, capacity payments, planned and unplanned plant outages, acquisitions and divestitures, certain fair value adjustments and developments outside of the normal course of operations.

In preparing these financial statements, TransCanada is required to make estimates and assumptions that affect both the amount and timing of recording assets, liabilities, revenues and expenses since the determination of these items may be dependent on future events. The Company uses the most current information available and exercises careful judgement in making these estimates and assumptions. In the opinion of management, these consolidated financial statements have been properly prepared within reasonable limits of materiality and within the framework of the Company’s significant accounting policies.

Effective January 1, 2011, the Company adopted CICA Handbook Section 1582 “Business Combinations”, which is effective for business combinations with an acquisition date after January 1, 2011. This standard was amended to require additional use of fair value measurements, recognition of additional assets and liabilities, and increased disclosure. Adopting the standard is expected to have a significant impact on the way the Company accounts for future business combinations. Entities adopting Section 1582 were also required to adopt CICA Handbook Sections 1601 “Consolidated Financial Statements” and 1602 “Non-Controlling Interests”. Sections 1601 and 1602 require Non-Controlling Interests to be presented as part of Equity on the balance sheet. In addition, the income statement of the controlling parent now includes 100 per cent of the subsidiary’s results and presents the allocation of income between the controlling and non-controlling interests. Changes resulting from the adoption of Section 1582 were applied prospectively and changes resulting from the adoption of Sections 1601 and 1602 were applied retrospectively.

In accordance with GAAP, TransCanada follows specific accounting policies unique to a rate-regulated business. These rate-regulated accounting (RRA) standards allow the timing of recognition of certain revenues and expenses to differ from the timing that may otherwise be expected in a non-rate-regulated business under GAAP in order to appropriately reflect the economic impact of regulators' decisions regarding the Company's revenues and tolls. The IASB has concluded that the development of RRA under IFRS requires further analysis and has removed the RRA project from its current agenda. TransCanada does not expect a final RRA standard under IFRS to be effective in the foreseeable future.

In October 2010, the AcSB and the Canadian Securities Administrators amended their policies applicable to Canadian publicly accountable enterprises that use RRA in order to permit these entities to defer the adoption of IFRS for one year. TransCanada deferred its adoption and accordingly will continue to prepare its consolidated financial statements in 2011 in accordance with Canadian GAAP, as defined by Part V of the CICA Handbook, in order to continue using RRA.

As a registrant with the U.S. Securities and Exchange Commission, TransCanada prepares and files a “Reconciliation to United States GAAP” and has the option to prepare and file its consolidated financial statements using U.S. GAAP. As a result of the developments noted above, the Company’s Board of Directors has approved the adoption of U.S. GAAP effective January 1, 2012. The accounting policies and financial impact of TransCanada adopting U.S. GAAP are consistent with that currently reported in the “Reconciliation to United States GAAP” and, as a result, significant changes to existing systems and processes are not required to implement U.S. GAAP as the Company’s primary accounting standard.

For the three months ended June 30	Natural Gas				Oil
(unaudited)	Pipelines				Pipelines(1)			Energy				Corporate				Total
(millions of dollars)	2011		2010		2011		2010	2011		2010		2011		2010		2011		2010

Revenues	1,067		1,061		211		-	865		862		-		-		2,143		1,923
Plant operating costs and other	(356	)	(365	)	(58	)	-	(393	)	(377	)	(15	)	(22	)	(822	)	(764	)
Commodity purchases resold	-		-		-		-	(185	)	(216	)	-		-		(185	)	(216	)
Depreciation and amortization	(244	)	(251	)	(34	)	-	(97	)	(90	)	(4	)	-		(379	)	(341	)
	467		445		119		-	190		179		(19	)	(22	)	757		602
Interest expense																(235	)	(187	)
Interest expense of joint ventures																(11	)	(15	)
Interest income and other																23		(18	)
Income taxes expense																(139	)	(65	)
Net Income																395		317
Net Income Attributable to Non-Controlling Interests																(28	)	(22	)
Net Income Attributable to Controlling Interests																367		295
Preferred Share Dividends																(14	)	(10	)
Net Income Attributable to Common Shares																353		285

For the six months ended June 30	Natural Gas				Oil
(unaudited)	Pipelines				Pipelines(1)			Energy				Corporate				Total
(millions of dollars)	2011		2010		2011		2010	2011		2010		2011		2010		2011		2010

Revenues	2,196		2,190		346		-	1,844		1,688		-		-		4,386		3,878
Plant operating costs and other	(689	)	(726	)	(94	)	-	(759	)	(737	)	(39	)	(48	)	(1,581	)	(1,511	)
Commodity purchases resold	-		-		-		-	(462	)	(472	)	-		-		(462	)	(472	)
Depreciation and amortization	(488	)	(504	)	(57	)	-	(197	)	(180	)	(7	)	-		(749	)	(684	)
	1,019		960		195		-	426		299		(46	)	(48	)	1,594		1,211
Interest expense																(446	)	(369	)
Interest expense of joint ventures																(27	)	(31	)
Interest income and other																56		6
Income taxes expense																(317	)	(166	)
Net Income																860		651
Net Income Attributable to Non-Controlling Interests																(64	)	(53	)
Net Income Attributable to Controlling Interests																796		598
Preferred Share Dividends																(28	)	(17	)
Net Income Attributable to Common Shares																768		581

In May 2011, PipeLines LP completed a public offering of 7,245,000 common units at a price of US$47.58 per unit, resulting in gross proceeds of approximately US$345 million. TransCanada contributed an additional approximate US$7 million to maintain its general partnership interest and did not purchase any other units. Upon completion of this offering, TransCanada’s ownership interest in PipeLines LP decreased from 38.2 per cent to 33.3 per cent. In addition, PipeLines LP made draws of US$61 million on a bridge loan facility and of US$125 million on its senior revolving credit facility.

In the three and six months ended June 30, 2011, TransCanada issued 2.8 million and 5.4 million (2010 – 2.6 million and 4.9 million) common shares, respectively, under its Dividend Reinvestment and Share Purchase Plan (DRP), in lieu of making cash dividend payments of $109 million and $202 million, respectively (2010 - $92 million and $170 million). Commencing with the dividends declared April 28, 2011, dividends payable to shareholders who participate in the DRP are satisfied with common shares purchased on the open market determined on the basis of the weighted average purchase price of such common shares. Previously, common shares issued in lieu of cash dividends under the DRP were issued from treasury.

TransCanada’s maximum counterparty credit exposure with respect to financial instruments at the balance sheet date, without taking into account security held, consisted of accounts receivable, portfolio investments recorded at fair value, the fair value of derivative assets, and notes, loans and advances receivable. The carrying amounts and fair values of these financial assets, except amounts for derivative assets, are included in Accounts Receivable and Other, and Available-For-Sale Assets in the Non-Derivative Financial Instruments Summary table below. Guarantees, letters of credit and cash are the primary types of security provided to support these amounts. The majority of counterparty credit exposure is with counterparties who are investment grade. At June 30, 2011, there were no significant amounts past due or impaired.

At June 30, 2011, the fair value of proprietary natural gas inventory held in storage, as measured using a weighted average of forward prices for the following four months less selling costs, was $47 million (December 31, 2010 - $49 million). The change in the fair value adjustment of proprietary natural gas inventory in storage in the three and six months ended June 30, 2011 resulted in net pre-tax unrealized losses of $1 million and gains of $1 million, respectively (2010 – gains of $4 million and losses of $20 million, respectively), which were recorded as adjustments to Revenues and Inventories. The change in fair value of natural gas forward purchase and sale contracts in the three and six months ended June 30, 2011 resulted in net pre-tax unrealized losses of $3 million and $10 million, respectively (2010 – gains of $2 million and $5 million, respectively), which were included in Revenues.

TransCanada uses a Value-at-Risk (VaR) methodology to estimate the potential impact from its exposure to market risk on its liquid open positions. VaR represents the potential change in pre-tax earnings over a given holding period. It is calculated assuming a 95 per cent confidence level that the daily change resulting from normal market fluctuations in its open positions will not exceed the reported VaR. Although losses are not expected to exceed the statistically estimated VaR on 95 per cent of occasions, losses on the other five per cent of occasions could be substantially greater than the estimated VaR. TransCanada’s consolidated VaR was $11 million at June 30, 2011, which was consistent with VaR at December 31, 2010 of $12 million.

The Company hedges its net investment in self-sustaining foreign operations (on an after-tax basis) with U.S. dollar-denominated debt, cross-currency interest rate swaps, forward foreign exchange contracts and foreign exchange options. At June 30, 2011, the Company had designated as a net investment hedge U.S. dollar-denominated debt with a carrying value of $9.5 billion (US$9.8 billion) and a fair value of $10.8 billion (US$11.2 billion). At June 30, 2011, $279 million (December 31, 2010 - $181 million) was included in Other Current Assets and Intangibles and Other Assets for the fair value of forwards and swaps used to hedge the Company’s net U.S. dollar investment in foreign operations.

	June 30, 2011		December 31, 2010
(unaudited) (millions of dollars)	Carrying Amount	Fair Value	Carrying Amount	Fair Value

Financial Assets(1)
Cash and cash equivalents	468	468	764	764
Accounts receivable and other(2)(3)	1,488	1,520	1,555	1,595
Available-for-sale assets(2)	22	22	20	20
	1,978	2,010	2,339	2,379

Financial Liabilities(1)(3)
Notes payable	1,628	1,628	2,092	2,092
Accounts payable and deferred amounts(4)	1,076	1,076	1,436	1,436
Accrued interest	347	347	367	367
Long-term debt	17,340	20,498	17,922	21,523
Long-term debt of joint ventures	839	946	866	971
Junior subordinated notes	955	962	985	992
	22,185	25,457	23,668	27,381

(1)

Consolidated Net Income in the three and six months ended June 30, 2011 included losses of $2 million and $11 million, respectively, (2010 – losses of $2 million and $9 million, respectively), for fair value adjustments related to interest rate swap agreements on US$350 million (2010 – US$150 million) of Long-Term Debt. There were no other unrealized gains or losses from fair value adjustments to the non-derivative financial instruments.

June 30, 2011
(unaudited) (all amounts in millions unless otherwise indicated)		Power			Natural Gas			Foreign Exchange			Interest

Derivative Financial Instruments Held for Trading(1)
Fair Values(2)
Assets		$149			$118			$6			$18
Liabilities		$(114	)		$(146	)		$(15	)		$(19	)
Notional Values
Volumes(3)
Purchases		21,569			155			-			-
Sales		23,961			123			-			-
Canadian dollars		-			-			-			634
U.S. dollars		-			-			US 1,622			US 250
Cross-currency		-			-			47/US 37			-

Net unrealized gains/(losses) in the period(4)
Three months ended June 30, 2011		$4			$(9	)		$(2	)		$1
Six months ended June 30, 2011		$3			$(26	)		$-			$-

Net realized gains/(losses) in the period(4)
Three months ended June 30, 2011		$8			$(15	)		$12			$3
Six months ended June 30, 2011	$11			$(41		)	$33			$5

Maturity dates	2011-2018			2011-2016			2011-2012			2012-2016

Derivative Financial Instruments in Hedging Relationships(5)(6)
Fair Values(2)
Assets		$57			$5			$-			$11
Liabilities		$(197	)		$(17	)		$(56	)		$(14	)
Notional Values
Volumes(3)
Purchases		18,524			14			-			-
Sales		9,187			-			-			-
U.S. dollars		-			-			US 120			US 1,000
Cross-currency		-			-		136/US 100				-

Net realized losses in the period(4)
Three months ended June 30, 2011		$(8	)		$(5	)		$-			$(4	)
Six months ended June 30, 2011		$(46	)		$(8	)		$-			$(9	)

Maturity dates		2011-2017			2011-2013			2011-2014			2011-2015

(1)

All derivative financial instruments in the held-for-trading classification have been entered into for risk management purposes and are subject to the Company’s risk management strategies, policies and limits. These include derivatives that have not been designated as hedges or do not qualify for hedge accounting treatment but have been entered into as economic hedges to manage the Company’s exposures to market risk.

(4)

Realized and unrealized gains and losses on held-for-trading derivative financial instruments used to purchase and sell power and natural gas are included on a net basis in Revenues. Realized and unrealized gains and losses on interest rate and foreign exchange derivative financial instruments held for trading are included in Interest Expense and Interest Income and Other, respectively. The effective portion of unrealized gains and losses on derivative financial instruments in cash flow hedging relationships is initially recognized in Other Comprehensive Income and reclassified to Revenues, Interest Expense and Interest Income and Other, as appropriate, as the original hedged item settles.

(5)

All hedging relationships are designated as cash flow hedges except for interest rate derivative financial instruments designated as fair value hedges with a fair value of $11 million and a notional amount of US$350 million at June 30, 2011. Net realized gains on fair value hedges for the three and six months ended June 30, 2011 were $2 million and $4 million, respectively, and were included in Interest Expense. In the three and six months ended June 30, 2011, the Company did not record any amounts in Net Income related to ineffectiveness for fair value hedges.

(6)

For the three and six months ended June 30, 2011, Net Income included gains of $2 million and losses of $1 million, respectively, for changes in the 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. For the three and six months ended June 30, 2011, there were no gains or losses included in Net Income for discontinued cash flow hedges. No amounts have been excluded from the assessment of hedge effectiveness.

2010
(unaudited) (all amounts in millions unless otherwise indicated)		Power			Natural Gas			Foreign Exchange			Interest

Derivative Financial Instruments Held for Trading
Fair Values(1)(2)
Assets		$169			$144			$8			$20
Liabilities		$(129	)		$(173	)		$(14	)		$(21	)
Notional Values(2)
Volumes(3)
Purchases		15,610			158			-			-
Sales		18,114			96			-			-
Canadian dollars		-			-			-			736
U.S. dollars		-			-			US 1,479			US 250
Cross-currency		-			-			47/US 37			-

Net unrealized (losses)/gains in the period(4)
Three months ended June 30, 2010		$(10	)		$3			$(11	)		$(13	)
Six months ended June 30, 2010		$(26	)		$5			$(11	)		$(17	)

Net realized gains/(losses) in the period(4)
Three months ended June 30, 2010		$15			$(17	)		$(6	)		$(6	)
Six months ended June 30, 2010		$37			$(29	)		$2			$(10	)

Maturity dates(2)	2011-2015			2011-2015			2011-2012			2011-2016

Derivative Financial Instruments in Hedging Relationships(5)(6)
Fair Values(1)(2)
Assets		$112			$5			$-			$8
Liabilities		$(186	)		$(19	)		$(51	)		$(26	)
Notional Values(2)
Volumes(3)
Purchases		16,071			17			-			-
Sales		10,498			-			-			-
U.S. dollars		-			-			US 120			US 1,125
Cross-currency		-			-		136/US 100				-

Net realized losses in the period(4)
Three months ended June 30, 2010		$(36	)		$(6	)		$-			$(9	)
Six months ended June 30, 2010		$(43	)		$(9	)		$-			$(19	)

Maturity dates(2)		2011-2015			2011-2013			2011-2014			2011-2015

(4)

(5)

All hedging relationships are designated as cash flow hedges except for interest rate derivative financial instruments designated as fair value hedges with a fair value of $8 million and a notional amount of US$250 million at December 31, 2010. Net realized gains on fair value hedges for the three and six months ended June 30, 2010 were $1 million and $2 million, respectively, and were included in Interest Expense. In the three and six months ended June 30, 2010, the Company did not record any amounts in Net Income related to ineffectiveness for fair value hedges.

(6)

For the three and six months ended June 30, 2010, Net Income included gains of $7 million and losses of $1 million, respectively, for changes in the 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. For the three and six months ended June 30, 2010, there were no gains or losses included in Net Income for discontinued cash flow hedges. No amounts were excluded from the assessment of hedge effectiveness.

The Company’s financial assets and liabilities recorded at fair value have been categorized into three categories based on a fair value hierarchy. In Level I, the fair value of assets and liabilities is determined by reference to quoted prices in active markets for identical assets and liabilities. In Level II, determination of the fair value of assets and liabilities includes valuations using inputs, other than quoted prices, for which all significant inputs are observable, directly or indirectly. This category includes fair value determined using valuation techniques such as option pricing models and extrapolation using observable inputs. In Level III, determination of the fair value of assets and liabilities is based on inputs that are not readily observable and are significant to the overall fair value measurement. Long-dated commodity transactions in certain markets are included in this category. Long-dated commodity prices are derived with a third-party modelling tool that uses market fundamentals to derive long-term prices.

Assets/(Liabilities)	Quoted Prices in Active Markets (Level 1)				Significant Other Observable Inputs (Level II)				Significant Unobservable Inputs (Level III)				Total
(unaudited) (millions of dollars, pre-tax)	June 30 2011		Dec 31 2010		June 30 2011		Dec 31 2010		June 30 2011		Dec 31 2010		June 30 2011		Dec 31 2010

Natural Gas Inventory	-		-		47		49		-		-		47		49
Derivative Financial Instrument Assets:
Interest rate contracts	-		-		29		28		-		-		29		28
Foreign exchange contracts	11		10		278		179		-		-		289		189
Power commodity contracts	-		-		194		269		3		5		197		274
Natural gas commodity contracts	68		93		53		56		-		-		121		149
Derivative Financial Instrument Liabilities:
Interest rate contracts	-		-		(32	)	(47	)	-		-		(32	)	(47	)
Foreign exchange contracts	(17	)	(11	)	(59	)	(54	)	-		-		(76	)	(65	)
Power commodity contracts	-		-		(272	)	(299	)	(30	)	(8	)	(302	)	(307	)
Natural gas commodity contracts	(133	)	(178	)	(28	)	(15	)	-		-		(161	)	(193	)
Non-Derivative Financial Instruments:
Available-for-sale assets	22		20		-		-		-		-		22		20
	(49	)	(66	)	210		166		(27	)	(3	)	134		97

Three months ended June 30	Pension Benefit Plans				Other Benefit Plans
(unaudited)(millions of dollars)	2011		2010		2011		2010

Current service cost	13		13		1		1
Interest cost	22		22		2		2
Expected return on plan assets	(28	)	(27	)	(1	)	(1	)
Amortization of transitional obligation related to regulated business	-		-		1		1
Amortization of net actuarial loss	5		2		1		1
Amortization of past service costs	1		1		-		-
Net benefit cost recognized	13		11		4		4


Six months ended June 30	Pension Benefit Plans				Other Benefit Plans
(unaudited)(millions of dollars)	2011		2010		2011		2010

Current service cost	27		25		1		1
Interest cost	45		45		4		4
Expected return on plan assets	(56	)	(54	)	(1	)	(1	)
Amortization of transitional obligation related to regulated business	-		-		1		1
Amortization of net actuarial loss	11		4		1		1
Amortization of past service costs	2		2		-		-
Net benefit cost recognized	29		22		6		6

On May 3, 2011, the Company completed the sale of a 25 per cent interest in each of Gas Transmission Northwest LLC (GTN LLC) and Bison Pipeline LLC (Bison LLC) to PipeLines LP for an aggregate purchase price of US$605 million, subject to closing adjustments, which included US$81 million of long-term debt, or 25 per cent of GTN LLC debt outstanding. GTN LLC and Bison LLC own the GTN and Bison natural gas pipelines, respectively.

On May 3, 2011, PipeLines LP completed an underwritten public offering of 7,245,000 common units, including 945,000 common units purchased by the underwriters upon full exercise of an over-allotment option, at US$47.58 per unit. Gross proceeds of approximately US$345 million from this offering were used to partially fund the acquisition. The acquisition was also funded by draws of US$61 million on PipeLines LP’s bridge loan facility and of US$125 million on its US$250 million senior revolving credit facility.

As part of this offering, TransCanada made a capital contribution of approximately US$7 million to maintain its two per cent general partnership interest in PipeLines LP and did not purchase any other units. As a result of the common units offering, TransCanada's ownership in PipeLines LP decreased from 38.2 per cent to 33.3 per cent and an after-tax dilution gain of $30 million ($50 million pre-tax) was recorded in Contributed Surplus.


	TransCanada welcomes questions from shareholders and potential investors. Please telephone:

	Investor Relations, at (800) 361-6522 (Canada and U.S. Mainland) or direct dial David Moneta/ Terry Hook/Lee Evans at (403) 920-7911. The investor fax line is (403) 920-2457. Media Relations: James Millar/Terry Cunha/Shawn Howard (403) 920-7859 or (800) 608-7859.

	Visit the TransCanada website at: www.transcanada.com.


(unaudited)	Derivatives(1)
(millions of dollars, pre-tax)	2011		2010

Balance at January 1	(3	)	(2	)
New contracts(2)	1		(10	)
Transfers out of Level III(3)	(4	)	(15	)
Settlements	-		(2	)
Change in unrealized gains recorded in Net Income	1		14
Change in unrealized (losses)/gains recorded in Other Comprehensive Income	(22	)	10
Balance at June 30	(27	)	(5	)