Exhibit 99.2

Terasen Inc.

Consolidated Financial Statements

for the six months ended June 30, 2005

(Unaudited)

Terasen Inc.

Consolidated Statements of Earnings (Unaudited)

In millions of Canadian dollars, except per share amounts Six months ended June 30	2005		2004 (Restated)
Revenues
Natural gas distribution	$	852.1	$	799.6
Petroleum transportation		105.7		110.7
Water and utility services		111.8		87.8
Other activities		9.8		15.4
		1,079.4		1,013.5
Expenses
Cost of natural gas		527.8		477.7
Cost of revenues from water and utility services       and other activities		84.4		74.8
Operation and maintenance		150.3		148.4
Depreciation and amortization		73.2		73.8
Property and other taxes		36.1		35.6
		871.8		810.3
Operating income		207.6		203.2
Financing costs		89.3		87.8
Earnings before share of equity earnings and       income taxes		118.3		115.4
Share of equity earnings from long-term       investments		12.8		6.7
Earnings before income taxes		131.1		122.1
Income taxes		35.3		36.3
Net earnings	$	95.8	$	85.8
Common shares – weighted average  (millions)		105.4		104.6
Basic earnings per common share  (note  7)	$	0.91	$	0.82
Diluted earnings per common share (note 7)	$	0.90	$	0.81

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Terasen Inc.

Consolidated Statements of Retained Earnings (Unaudited)

In millions of Canadian dollars Six months ended June 30 2005 2004               (Restated)          

Retained earnings, beginning of period	$	418.9	$	355.5
Net earnings		95.8		85.8
		514.7		441.3
Dividends on common shares		47.4		42.4
Retained earnings, end of period	$	467.3	$	398.9

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Terasen Inc.

 Consolidated Statements of Financial Position

In millions of Canadian dollars		June 30 2005 (unaudited)				December 31   2004   (Restated)
	Assets
	Current assets
	Cash and short-term investments	$	91.6		$		20.0
	Accounts receivable		280.0				348.6
	Inventories of gas in storage and supplies		201.2				189.2
	Prepaid expenses		17.7				11.2
	Current portion of rate stabilization accounts		24.5				27.1
			615.0				596.1
	Property, plant and equipment		3,932.1				3,892.5
	Long term investments (note 2(b))		267.6				218.9
	Goodwill		117.7				128.0
	Rate stabilization accounts		53.4				60.6
	Other assets		70.1				74.5
		$	5,055.9		$		4,970.6
	Liabilities and Shareholders’ Equity
	Current liabilities
	Short-term notes	$	360.5		$		248.0
	Accounts payable and accrued liabilities		286.2				369.8
	Income and other taxes payable		54.7				36.4
	Current portion of rate stabilization accounts		41.3				27.6
	Current portion of long-term debt		628.9				416.7
			1,371.6				1,098.5
	Long-term debt		2,029.1				2,291.6
	Other long-term liabilities and deferred credits		144.2				140.7
	Future income taxes		83.5				68.7
			3,628.4				3,599.5
	Shareholders' equity
	Common shares		889.0				883.4
	Contributed surplus (note 6)		133.6				132.5
	Retained earnings		467.3				418.9
	Cumulative currency translation adjustment		(11.4	)			(12.7)
			1,478.5				1,422.1
	Less cost of common shares held by            Terasen Pipelines (Trans Mountain) Inc.		51.0				51.0
			1,427.5				1,371.1
		$	5,055.9		$		4,970.6

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Terasen Inc.

Consolidated Statements of Cash Flows (Unaudited)

In millions of Canadian dollars Six months ended June 30	2005			2004 (Restated)
Cash flows provided by (used for)
Operating activities
Net earnings	$	95.8		$	85.8
Adjustments for non-cash items
Depreciation and amortization		73.2			73.8
Share of equity earnings from long-term               investments, in excess of cash               distributions		(12.6	)		(7.1	)
Future income taxes		0.3			2.1
Other		3.2			4.9
		159.9			159.5
Change in rate stabilization accounts		23.5			13.7
Changes in non-cash working capital		(5.7	)		75.4
		177.7			248.6
Investing activities
Property, plant and equipment		(126.9	)		(60.7	)
Proceeds on the sale of natural gas distribution assets		-			7.6
Other assets		(2.9	)		(8.8	)
		(129.8	)		(61.9	)
Financing activities
Increase (decrease) in short-term notes		112.5			(302.9	)
Increase in long-term debt		450.5			211.8
Reduction of long-term debt		(497.5	)		(46.3	)
Issue of common shares, net of issue costs		5.6			8.9
Dividends on common shares		(47.4	)		(42.4	)
		23.7			(170.9	)
Net increase in cash		71.6			15.8
Cash at beginning of period		20.0			1.5
Cash at end of period	$	91.6		$	17.3
Supplemental cash flow information
Interest paid in the period	$	86.4		$	81.9
Income taxes paid in the period		25.3			44.2

Cash is defined as cash or bank indebtedness.

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Terasen Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Tabular amounts in millions of Canadian dollars, except per share amounts)

SIX MONTHS ENDED JUNE 30, 2005 AND 2004

1.

Basis of Presentation

The accounting policies and methods of application used in the preparation of these interim consolidated financial statements are consistent with the accounting policies used in the Company's year end audited consolidated financial statements of December 31, 2004, except as set out in note 2. These consolidated financial statements do not include all disclosures required for annual financial statements, and therefore these statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2004, as set out in the 2004 Annual Report. Certain comparative figures have been restated to conform with the current period presentation.

Quarterly net earnings (loss) from Terasen Gas have been restated to adjust for changes in the method of accounting for quarterly income tax expense. Previously, Terasen Gas’ estimated annual tax expense had been allocated and expensed in the quarterly interim financial statements based on income tax estimated to be collected in rates in each of the four quarters. Beginning in the fourth quarter of 2004, Terasen Gas’ income tax expense is determined by applying the effective annual tax rate to the pre-tax income in the quarter. The change affects income tax expense and net earnings for each of the quarters but has no impact on annual income tax expense and net earnings.

As a result of this change in accounting for income taxes, income tax expense and income and other taxes payable have increased by $5.4 million from the amounts previously reported for the six months ended and as at June 30, 2004.

2.

Significant Accounting Policies

a)

LIABILITIES AND EQUITY

In accordance with recent changes to the CICA Handbook Section 3861 “Financial Instruments – Disclosures and Presentation”, the Company’s $125 million 8% Capital Securities have been reclassified from shareholders’ equity to liabilities because the Capital Securities can be settled by issuing equity at a variable price dependent upon the market value of the Company’s common shares at the settlement date. As a result of the change, distributions associated with the Capital Securities are now recorded as financing costs and the related income-tax benefits are recorded within income tax expense. Previously, the distributions were recorded on an after-tax basis as a deduction from net earnings to determine earnings applicable to common shares. There is no impact to earnings applicable to common shares or earnings per share. The changes have been applied retroactively and have increased long-term debt and decreased shareholders’ equity, both by $125.0 million, compared to the amounts previously reported as at December 31, 2004. The restatement has also increased financing costs by $5.0 million, decreased income tax expense by $1.7 million and capital securities distributions by $3.3 million compared to the amounts previously reported for the six months ended June 30, 2004.

b)

EQUITY ACCOUNTING FOR INVESTMENT IN CLEAN ENERGY

As of March 31, 2005, the Company no longer exercises joint control of Clean Energy Fuels Corp. (“Clean Energy”) due to restructuring and amendments to voting arrangements of Clean Energy’s Board of Directors. The Company has, accordingly, changed as at March 31, 2005 its method of accounting for its investment in Clean Energy to the equity basis, rather than on the proportionately-consolidated basis. For

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Terasen Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Tabular amounts in millions of Canadian dollars, except per share amounts)

SIX MONTHS ENDED JUNE 30, 2005 AND 2004

the first three months ending March 31, 2005, the Company has proportionately consolidated the earnings of Clean Energy. Commencing April 1, 2005, earnings have been included in equity earnings from long-term investments.

c)

VARIABLE INTEREST ENTITIES

In January 2005, the Company adopted the CICA Handbook Accounting Guideline 15 “Consolidation of Variable Interest Entities”. The Company has performed a review of the entities with whom it conducts business and determined that under the definitions in the Guideline the Company’s investment in Express US Holdings LP, part of the Express System (the “Express System”), is deemed to be a variable interest entity. As the Company has not been identified as the primary beneficiary of Express System US Holdings LP, the Company continues to account for its investment in the Express System on an equity basis as described in the Company’s 2004 Annual Report. The Company’s future exposure to loss regarding its investment is represented by the carrying value of the investment.

The Express System includes the entities Express Pipeline LP and Express US Holdings LP. The Express System transports crude oil from Hardisty, Alberta, through the Rocky Mountain region of the United States and on to Wood River, Illinois. The Company has owned a one-third equal interest in the Express System with two other independent partners since January 9, 2003.

3.

Segment Disclosures

Six months ended June 30
2005	Natural gas distribution		Petroleum transportation		Water & utility services		Other activities			Total
Revenues	$	852.1	$	105.7	$	111.8	$	9.8		$	1,079.4
Net earnings (loss)		63.4		33.6		4.6		(5.8	)		95.8
Total assets		3,421.9		1,358.5		206.8		68.7			5,055.9
2004
Revenues	$	799.6	$	$110.7	$	87.8	$	15.4		$	1,013.5
Net earnings (loss)		59.8		34.5		2.6		(11.1	)		85.8
Total assets		3,241.3		1,332.5		150.6		53.9			4,778.3

4.

Seasonal Operations

Due to the seasonal nature of the Company’s natural gas distribution and water and utility services operations, quarterly earnings statements are not indicative of earnings on an annual basis.

5.

Employee Benefit Plans

The Company and its subsidiaries have defined benefit pension plans and defined contribution pension plans for employees. The Company also provides post-employment benefits other than pensions for retired employees. Additional information about these benefit plans can be found in the Company’s 2004 Annual Report. The Company’s estimated contributions to defined benefit pension plans for 2005 are anticipated to be $7.0 million (2004 actual $7.0 million).

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Terasen Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Tabular amounts in millions of Canadian dollars, except per share amounts)

SIX MONTHS ENDED JUNE 30, 2005 AND 2004

Costs recognized in the periods are presented in the following table:
  

Six months ended June 30
	Pension benefit plans						Other benefit plans
	2005			2004			2005		2004
Current service cost	$	4.4		$	4.0		$	0.8	$	0.6
Interest cost on projected benefit obligations		9.0			8.6			2.0		2.0
Expected return on plan assets		(9.6	)		(13.4	)		-		-
Net actuarial losses		-			4.0			-		1.2
Plan amendments		0.4			-			0.2		-
Past service costs		-			0.2			-		-
Net benefit plan expense before adjustments of employee benefit costs:		4.2			3.4			3.0		3.8
Difference between actual and expected return on plan assets		0.2			4.0			-		-
Difference between actual and recognized actuarial gains (losses) in the year		1.2			(2.6	)		0.6		-
Difference between actual and recognized past service		-			-			0.4		-
Amortization of transitional obligation (benefit)		(1.6	)		(1.8	)		-		0.8
Other		-			0.8			-		-
Net benefit plan expense	$	4.0		$	3.8		$	4.0	$	4.6
Defined contribution plan expense	$	1.0		$	1.2
	$	5.0		$	5.0

6.

Stock-Based Compensation

In the first six months of 2005, 855,200 stock options were granted (2004 – 741,400) at an average exercise price of $29.45 (2004 - $23.88) under the Company’s Share Option Plan. The Company has applied the fair value based method of accounting for stock options granted after January 1, 2003. Reported earnings for the six months ended June 30, 2005 include a compensation charge of $1.1 million (2004 - $0.5 million) representing the fair value of options granted in 2003, 2004 and 2005 amortized over the vesting period, with a corresponding increase to contributed surplus. Had the Company used the fair value based method to account for stock options granted during 2002, pro forma earnings and earnings per share for the six months ended June 30, 2004 would have been as follows:

Six months ended June 30, 2004
Net earnings	As reported	$ 85.8
	Pro forma	$ 85.2
Basic earnings per common share	As reported	$ 0.82
	Pro forma	$ 0.81
Diluted earnings per common share	As reported	$ 0.81
	Pro forma	$ 0.81

The Black-Scholes option pricing model was used to calculate the stock option fair values.  

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Terasen Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Tabular amounts in millions of Canadian dollars, except per share amounts)

SIX MONTHS ENDED JUNE 30, 2005 AND 2004

The weighted average fair value of options granted in the six months ended June 30, 2005 was $4.33 (six months ended June 30, 2004 - $2.39). Significant assumptions in valuing the options are as follows:

Six months ended June 30	2005		2004
	Regular Options	Performance Based Options	Regular Options	Performance Based Options
Interest rate	3.6%	3.7%	3.5 – 3.7%	3.5%
Expected volatility	16.5%	16.5%	15.1 – 15.4%	15.4%
Expected life	5 years	6 years	5 years	6 years

The following table provides information about options outstanding and options exercisable at June 30, 2005:

Regular Share Options	Options outstanding			Options exercisable
Exercise price range	Shares under option	Weighted average exercise price	Weighted average remaining contractual life	Number exercisable	Weighted average exercise price
$10.60 – $14.90	171,254	$ 13.30	2.6	171,254	$ 13.30
$15.50 – $19.75	264,593	$ 17.72	4.7	252,931	$ 17.63
$21.92 – $29.45	37,400	$ 24.08	6.5	6,666	$ 23.43
	473,247	$ 16.72	4.1	430,851	$ 16.00

Performance-based Options	Options outstanding			Options exercisable
Exercise price range	Shares under option	Weighted average exercise price	Weighted average remaining contractual life	Number exercisable	Weighted average exercise price
$11.25 – $13.63	118,400	$ 12.43	2.3	118,400	$ 12.43
$15.50 – $19.75	987,343	$ 18.37	5.0	819,682	$ 18.09
$23.87 – $29.45	1,505,100	$ 26.99	7.2	-	-
	2,610,843	$ 23.07	6.1	938,082	$ 17.38

7.

Earnings Per Share

Basic earnings per share are based on the weighted average number of common shares outstanding during the period. Diluted earnings per share are based on the weighted average number of common shares and dilutive stock options outstanding at the beginning of or granted during the period. The Company's performance-based share options are considered to be contingently issuable shares and have been included in the treasury stock method calculation only if all performance criteria of the options have been satisfied. The possible exchange of the $125.0 million Capital Securities into common shares has not been included in the treasury stock method calculation, since similar obligations in the past have been paid wholly in cash.

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Terasen Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Tabular amounts in millions of Canadian dollars, except per share amounts)

SIX MONTHS ENDED JUNE 30, 2005 AND 2004

Six months ended June 30, 2005	Net Earnings	Weighted Average Shares	Earnings Per Share
Basic earnings per share (2004 - $0.82)	$    95.8	105.4	$   0.91
Add:  weighted-average number of dilutive shares that would be     issued under treasury stock method (2004 – 0.7 million)		0.6
Diluted earnings per share (2004 - $0.81)	$    95.8	106.0	$   0.90

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