-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EAnUyEkga8Rq+oxJfGKp2v+pUQIf4J4hDkjTHW/97Ghk7xqARC4OlUHHogVk2RYX 5Fe0PBzlFktnE7NsQ/Mj+w== 0001047469-04-014091.txt : 20040428 0001047469-04-014091.hdr.sgml : 20040428 20040428165254 ACCESSION NUMBER: 0001047469-04-014091 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSCANADA PIPELINES LTD CENTRAL INDEX KEY: 0000099070 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION [4922] IRS NUMBER: 522179728 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08887 FILM NUMBER: 04761144 BUSINESS ADDRESS: STREET 1: 450 I STREET SW STREET 2: P O BOX 1000 STATION M CITY: CALGARY ALBERTA STATE: A0 ZIP: T2P 5H1 BUSINESS PHONE: 4039207669 MAIL ADDRESS: STREET 1: 450 I STREET SW CITY: CALGARY ALBERTA STATE: A0 ZIP: T2P 5H1 6-K 1 a2134694z6-k.txt FORM 6-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF THE SECURITIES EXCHANGE ACT OF 1934 For the month of April 2004 COMMISSION FILE No. 1-8887 TRANSCANADA PIPELINES LIMITED (TRANSLATION OF REGISTRANT'S NAME INTO ENGLISH) 450 - 1 STREET S.W., CALGARY, ALBERTA, T2P 5H1, CANADA (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F Form 20-F Form 40-F X ------------- -------------- Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes No X ------------- -------------- I The documents listed below in this Section and filed as Exhibits 1 to 4 to this Form 6-K are hereby filed with the Securities and Exchange Commission for the purpose of being and hereby are incorporated by reference in Post-Effective Amendment No. 1 on Form F-9 to Registration Statement (Reg. No. 333-101140) on Form F-10 under the Securities Act of 1933, as amended. 1 Management's Discussion and Analysis of Financial Condition and Results of Operations of the registrant as at and for the period ended March 31, 2004. 2 Consolidated comparative interim unaudited financial statements of the registrant for the period ended March 31, 2004 (included in the registrant's First Quarter 2004 Quarterly Report). 3 Schedule of earnings coverage calculations at March 31, 2004. 4 U.S. GAAP reconciliation of the consolidated comparative interim unaudited financial statements of the registrant contained in the registrant's First Quarter 2004 Quarterly Report. II The document listed below in this Section and in the Exhibit Index to this Form 6-K is hereby filed with the Securities and Exchange Commission. 5 Comfort letter of KPMG LLP dated April 28, 2004. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TRANSCANADA PIPELINES LIMITED By: /s/ Russell K. Girling ------------------------------------------ Russell K. Girling Executive Vice-President, Corporate Development and Chief Financial Officer By: /s/ Lee G. Hobbs ------------------------------------------ Lee G. Hobbs Vice-President and Controller April 28, 2004 EXHIBIT INDEX 1 Management's Discussion and Analysis of Financial Condition and Results of Operations of the registrant as at and for the period ended March 31, 2004. 2 Consolidated comparative interim unaudited financial statements of the registrant for the period ended March 31, 2004 (included in the registrant's First Quarter 2004 Quarterly Report). 3 Schedule of earnings coverage calculations at March 31, 2004. 4 U.S. GAAP reconciliation of the consolidated comparative interim unaudited financial statements of the registrant contained in the registrant's First Quarter 2004 Quarterly Report. 5 Comfort letter of KPMG LLP dated April 28, 2004. 6 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 7 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 8 Certification of Chief Executive Officer regarding Periodic Report containing Financial Statements. 9 Certification of Chief Financial Officer regarding Periodic Report containing Financial Statements. EX-1 2 a2134694zex-1.txt EXHIBIT 1 EXHIBIT 1 [TRANSCANADA LOGO] TRANSCANADA PIPELINES LIMITED FIRST QUARTER 2004 QUARTERLY REPORT - ---------------- MANAGEMENT'S DISCUSSION AND ANALYSIS The following discussion and analysis dated April 23, 2004 should be read in conjunction with the accompanying unaudited consolidated financial statements of TransCanada PipeLines Limited (TCPL or the company) for the three months ended March 31, 2004 and the notes thereto. CONSOLIDATED RESULTS-AT-A-GLANCE Three months ended March 31 (unaudited)
(millions of dollars) 2004 2003 - -------------------------------------------------------- ----- ----- NET INCOME APPLICABLE TO COMMON SHARES 214 208 ----- ----- ----- -----
RESULTS OF OPERATIONS CONSOLIDATED TCPL's net income applicable to common shares (net earnings) for first quarter 2004 was $214 million compared to $208 million for first quarter 2003. The increase of $6 million was primarily due to lower net expenses in the Corporate segment, partially offset by lower net earnings from the Gas Transmission business. The decrease in net expenses of $13 million in the Corporate segment relates primarily to income tax refunds received in first quarter 2004. The lower net earnings of $9 million in the Gas Transmission business for first quarter 2004 compared to the same period in the prior year were primarily due to lower earnings from the Canadian Mainline and Alberta System. Net earnings from the Power business for first quarter 2004 were $2 million higher than in the same quarter of 2003. SEGMENT RESULTS-AT-A-GLANCE Three months ended March 31 (unaudited)
(millions of dollars) 2004 2003 - -------------------------------------------------------- ----- ----- Gas Transmission 149 158 Power 65 63 Corporate - (13) ----- ----- NET INCOME APPLICABLE TO COMMON SHARES 214 208 ----- ----- ----- -----
Funds generated from operations of $423 million for first quarter 2004 decreased $34 million compared to first quarter 2003. FIRST QUARTER REPORT 2004 TCPL [2 GAS TRANSMISSION The Gas Transmission business generated net earnings of $149 million for the quarter ended March 31, 2004, compared to $158 million for the same period in 2003. GAS TRANSMISSION RESULTS-AT-A-GLANCE Three months ended March 31 (unaudited)
(millions of dollars) 2004 2003 - ------------------------------------------------------ ---- ---- WHOLLY-OWNED PIPELINES Alberta System 40 42 Canadian Mainline 64 71 Foothills* 6 4 BC System 2 2 ---- ---- 112 119 ---- ---- OTHER GAS TRANSMISSION Great Lakes 17 17 Iroquois 8 7 TC PipeLines, LP 4 3 Portland** 6 7 Ventures LP 3 2 Trans Quebec & Maritimes 2 2 CrossAlta 1 3 TransGas de Occidente 3 4 Northern Development (1) (1) General, administrative, support and other (6) (5) ---- ---- 37 39 ---- ---- Net earnings 149 158 ---- ---- ---- ----
* The remaining ownership interests in Foothills, previously not held by TCPL, were acquired on August 15, 2003. ** TCPL increased its ownership interest in Portland to 43.4 per cent from 33.3 per cent on September 29, 2003 and to 61.7 per cent from 43.4 per cent on December 3, 2003. WHOLLY-OWNED PIPELINES Alberta System's net earnings of $40 million in first quarter 2004 decreased $2 million compared to $42 million in the same quarter of 2003, primarily due to a lower average investment base. Earnings in first quarter 2004 reflect the implicit return in the 2004 interim tolls approved by the Alberta Energy and Utilities Board (EUB). The 2004 interim tolls were based on the 2003 negotiated fixed revenue requirement of $1.277 billion plus certain adjustments. The 2003 negotiated settlement did not include an explicit rate of return on equity or capital structure; as such, the first quarter 2004 earnings approximate a return equivalent to a 10.9 per cent rate of return on 32 per cent deemed common equity or alternatively an 8.7 per cent rate of return on 40 per cent deemed common equity. The 32 per cent deemed common equity is the last approved by the EUB in the 1995 General Rate Application (GRA) and the 40 per cent deemed common equity is the requested amount in the current Generic Cost of Capital (GCOC) Proceeding. FIRST QUARTER REPORT 2004 TCPL [3 Canadian Mainline's first quarter 2004 net earnings of $64 million are $7 million lower than net earnings for the same quarter in 2003. This decrease is primarily due to a lower rate of return on common equity of 9.56 per cent in 2004 compared to 9.79 per cent in 2003, as well as a lower average investment base. The common equity return of 9.56 per cent is implicit in the interim tolls for 2004 which were approved by the National Energy Board (NEB) in December 2003. Also included in first quarter 2004 are negative earnings adjustments of $2 million after tax related to the estimate of incentive program earnings in 2003. Foothills' net earnings of $6 million in first quarter 2004 are $2 million higher than the same quarter in 2003. The remaining ownership interests in Foothills, previously not held by TCPL, were acquired in August 2003, and resulted in higher net earnings in first quarter 2004. OPERATING STATISTICS
Three months ended March 31 Alberta Canadian (unaudited) System* Mainline** Foothills*** BC System - ----------------------------------------- ------------- ------------- ------------- ------------ 2004 2003 2004 2003 2004 2003 2004 2003 ------- ----- ----- ----- ---- ---- ---- ---- Average investment base ($ millions) 4,762 4,966 8,314 8,692 722 748 231 238 Delivery volumes (Bcf) Total 1,013 1,062 723 805 281 259 87 61 Average per day 11.1 11.8 7.9 8.9 3.1 2.9 1.0 0.7 - ----------------------------------------------------------------------------------------------------------
* Field receipt volumes for the Alberta System for the three months ended March 31, 2004 were 950 Bcf (2003 - 956 Bcf); average per day was 10.4 Bcf (2003 - 10.6 Bcf). ** Canadian Mainline deliveries originating at the Alberta border and in Saskatchewan for the three months ended March 31, 2004 were 510 Bcf (2003 - 592 Bcf); average per day was 5.6 Bcf (2003 - 6.6 Bcf). *** The remaining interests in Foothills were acquired in August 2003. The delivery volumes in the table represent 100 per cent of Foothills. OTHER GAS TRANSMISSION TCPL's proportionate share of net earnings from Other Gas Transmission was $37 million for the three months ended March 31, 2004 compared to $39 million for the same period in 2003. The $2 million decrease was primarily due to lower earnings from CrossAlta as a result of lower storage margins from unfavourable market conditions. Higher U.S. dollar net earnings of U.S. pipelines in first quarter 2004 compared to first quarter 2003 were offset by the unfavourable impact of a weaker U.S. dollar. FIRST QUARTER REPORT 2004 TCPL [4 POWER POWER RESULTS-AT-A-GLANCE Three months ended March 31 (unaudited)
(millions of dollars) 2004 2003 - ------------------------------------------------------ ---- ---- Western operations 35 43 Eastern operations 34 25 Bruce Power investment 48 38 Power LP investment 10 11 General, administrative and support costs (25) (21) ---- ---- Operating and other income 102 96 Financial charges (2) (2) Income taxes (35) (31) ---- ---- Net earnings 65 63 ---- ---- ---- ----
Power's net earnings in first quarter 2004 of $65 million increased $2 million compared to $63 million in first quarter 2003. Higher earnings from Bruce Power L.P. (Bruce Power) and Eastern Operations were the primary reason for the increase. Partially offsetting the increase were lower earnings from Western Operations and higher general, administrative and support costs. WESTERN OPERATIONS Operating and other income for first quarter 2004 in Western Operations of $35 million was $8 million lower than first quarter 2003, mainly due to lower prices achieved on the overall sale of power in first quarter 2004, lower ManChief income in first quarter 2004 as a result of reduced dispatch levels and higher depreciation expense and lower electricity transmission tariffs in first quarter 2003. EASTERN OPERATIONS Operating and other income for first quarter 2004 in Eastern Operations of $34 million was $9 million higher compared to first quarter 2003. The increase was mainly due to increased water flows through the Curtis Palmer hydroelectric facilities, higher net margins on power sales reflecting the growth in the northeastern U.S. retail business with large commercial and industrial customers, and fees earned on the demobilization of the Cobourg temporary generation facility in Ontario. Partially offsetting these increases was the unfavourable impact of a weaker U.S. dollar in first quarter 2004. FIRST QUARTER REPORT 2004 TCPL [5 BRUCE POWER INVESTMENT BRUCE POWER RESULTS-AT-A-GLANCE Three months ended March 31 (unaudited)
(millions of dollars) 2004 2003 - ------------------------------------------------------ ---- ---- BRUCE POWER (100 per cent basis) Revenues 399 398 Operating expenses (250) (194) ---- ---- Operating income 149 204 Financial charges (18) (16) ---- ---- Income before income taxes 131 188 ---- ---- ---- ---- TCPL's interest in Bruce Power income before income taxes* 41 34 Adjustments 7 4 ---- ---- TCPL's income from Bruce Power before income taxes 48 38 ---- ---- ---- ----
* TCPL acquired its interest in Bruce Power on February 14, 2003. Bruce Power's 100 per cent income before income taxes from February 14, 2003 to March 31, 2003 was $107 million. Bruce Power contributed $48 million of pre-tax equity income in first quarter 2004 compared to $38 million in first quarter 2003. The increase primarily reflects TCPL's ownership for the entire first quarter 2004 compared to approximately six weeks of ownership in first quarter 2003. In addition, output was higher in first quarter 2004 as a result of the return to service of Units 3 and 4 which have increased Bruce Power's operating expenses and expanded capacity by approximately 1,500 megawatts (MW) from first quarter 2003. TCPL's share of power output for first quarter 2004 was approximately 2,530 gigawatt hours (GWh) compared to 1,087 GWh in first quarter 2003. Overall prices achieved during first quarter 2004 were approximately $49 per megawatt hour (MWh) compared to an average realized price of $57 per MWh in first quarter 2003. Approximately 50 per cent of the output was sold into Ontario's wholesale spot market in first quarter 2004 with the remainder being sold under longer term contracts. This represents an increase from 45 per cent sold into the spot market in first quarter 2003. On a per unit basis, the Bruce operating cost increased to $31 per MWh in first quarter 2004 from $28 per MWh in first quarter 2003. FIRST QUARTER REPORT 2004 TCPL [6 Unit 3 began producing electricity to the Ontario electricity grid on January 8, 2004 and was considered commercially in-service March 1, 2004. The return to service of Unit 3 brings Bruce Power's capacity to 4,660 MW. The Bruce units ran at an average availability of 80 per cent in first quarter 2004, whereas average availability during TCPL's period of ownership ending March 31, 2003 was 100 per cent. A series of unplanned maintenance outages limited overall output in first quarter 2004. Unit 3 was offline for more than 50 per cent of the first two months of 2004 to perform maintenance on its heat transport system and repair a turbine bearing. While Unit 3 was down, Bruce Power completed additional work that had been planned for an outage later in the year. As a result, the planned outage for Unit 3 in second quarter 2004 has been cancelled. The maintenance outage on Unit 8, which began in third quarter 2003, was extended until January 28, 2004 to repair support plates in three of the unit's eight steam generators. Equity income from Bruce Power is directly impacted by fluctuations in wholesale spot market prices for electricity as well as overall plant availability, which in turn, is impacted by scheduled and unscheduled maintenance. To reduce its exposure to spot market prices, Bruce Power has entered into fixed price sales contracts for approximately 45 per cent of planned output for the remainder of 2004. There is a planned maintenance outage at one of the Bruce A units for approximately five weeks of second quarter 2004. On March 12, 2004, Bruce Power was granted a five year operational license from the Canadian Nuclear Safety Commission for its Bruce A and B generating stations. POWER LP INVESTMENT Operating and other income of $10 million in first quarter 2004 from Power's 35.6 per cent investment in TransCanada Power, L.P. (Power LP) was consistent with first quarter 2003. GENERAL, ADMINISTRATIVE AND SUPPORT COSTS General, administrative and support costs increased $4 million compared to first quarter 2003, mainly reflecting higher support costs as part of the company's increased investment in Power. FIRST QUARTER REPORT 2004 TCPL [7 POWER SALES VOLUMES Three months ended March 31 (unaudited)
(GWh) 2004 2003 - ------------------------------------------------------- ----- ----- Western operations* 2,876 3,091 Eastern operations 1,611 1,685 Bruce Power investment** 2,530 1,087 Power LP investment 572 563 ----- ----- Total 7,589 6,426 ----- ----- ----- -----
* Sales volumes include TCPL's share of the Sundance B power purchase arrangement (50 per cent). ** Acquired on February 14, 2003. Sales volumes reflect TCPL's 31.6 per cent share of Bruce Power output. WEIGHTED AVERAGE PLANT AVAILABILITY*
Three months ended March 31 (unaudited) 2004 2003 - ------------------------------------------------------- ----- ----- Western operations 99% 98% Eastern operations 98% 84% Bruce Power investment** 80% 100% Power LP investment 99% 98% All plants 90% 96% --- ---- --- ----
* Plant availability represents the percentage of time in the year that the plant is available to generate power, whether actually running or not and is reduced by planned and unplanned outages. ** Acquired February 14, 2003. Bruce A Unit 3 is included effective March 1, 2004. CORPORATE Net expenses were nil and $13 million for the three months ended March 31, 2004 and 2003, respectively. The $13 million decrease in net expenses is almost entirely due to income tax refunds and refund interest received in first quarter 2004 relating to prior years. LIQUIDITY AND CAPITAL RESOURCES FUNDS GENERATED FROM OPERATIONS Funds generated from continuing operations were $423 million for the three months ended March 31, 2004 compared with $457 million for the same period in 2003. TCPL expects that its ability to generate sufficient amounts of cash in the short term and the long term, when needed, and to maintain financial capacity and flexibility to provide for planned growth is adequate and remains substantially unchanged since December 31, 2003. FIRST QUARTER REPORT 2004 TCPL [8 INVESTING ACTIVITIES In the three months ended March 31, 2004, capital expenditures, excluding acquisitions, totalled $101 million (2003 - $76 million) and related primarily to construction of new power plants and maintenance and capacity capital in the Gas Transmission business. Acquisitions for the three months ended March 31, 2004 were nil (2003 - $409 million). FINANCING ACTIVITIES TCPL retired long-term debt of $476 million in the quarter ended March 31, 2004. In February 2004, the company issued $200 million of five year notes bearing interest at 4.1 per cent. In March 2004, the company issued US$350 million of 30 year senior unsecured notes bearing interest at 5.6 per cent. For the quarter ended March 31, 2004, outstanding notes payable decreased by $229 million, while cash and short-term investments increased by $42 million. DIVIDENDS On April 23, 2004, TCPL's Board of Directors declared a dividend for the quarter ending June 30, 2004 in an aggregate amount equal to the aggregate quarterly dividend to be paid on July 30, 2004 by TransCanada Corporation on the issued and outstanding common shares as at the close of business on June 30, 2004. The Board also declared regular dividends on TCPL's preferred shares. CONTRACTUAL OBLIGATIONS There have been no material changes to TCPL's contractual obligations, including payments due for each of the next five years and thereafter, since December 31, 2003. For further information on these contractual obligations, refer to Management's Discussion and Analysis in TCPL's 2003 Annual Report. FINANCIAL AND OTHER INSTRUMENTS The following represents the material changes to the company's risk management and financial instruments since December 31, 2003. The tables reflect the impact of hedge accounting changes adopted prospectively, effective January 1, 2004, as further discussed under Accounting Changes - Hedging Relationships. FIRST QUARTER REPORT 2004 TCPL [9 FOREIGN EXCHANGE AND INTEREST RATE MANAGEMENT ACTIVITY The company manages the foreign exchange risk of U.S. dollar debt, U.S. dollar expenses and the interest rate exposures of the Alberta System, the Canadian Mainline and the Foothills System through the use of foreign currency and interest rate derivatives. These derivatives are comprised of contracts for periods up to eight years. Certain of the realized gains and losses on interest rate derivatives are shared with shippers on predetermined terms.
Asset/(Liability) March 31, 2004 (millions of dollars) (unaudited) December 31, 2003 - ------------------------------------- ------------------------ ------------------------ Carrying Fair Carrying Fair Amount Value Amount Value -------- ----- -------- ----- FOREIGN EXCHANGE Cross-currency swaps (21) (21) (26) (26) INTEREST RATE Interest rate swaps Canadian dollars 23 23 2 15 U.S. dollars 9 9 - 8 - ---------------------------------------------------------------------------------------------------
At March 31, 2004, the principal amount of cross-currency swaps was US$282 million (December 31, 2003 - US$282 million). Notional principal amounts for interest rate swaps were $769 million (December 31, 2003 - $964 million) and US$100 million (December 31, 2003 - US$100 million). The company manages the foreign exchange risk and interest rate exposures of its other U.S. dollar debt through the use of foreign currency and interest rate derivatives. These derivatives are comprised of contracts for periods up to nine years. The fair values of the interest rate derivatives are shown in the table below.
Asset/(Liability) March 31, 2004 (millions of dollars) (unaudited) December 31, 2003 - ------------------------------------- ------------------------ ------------------------ Carrying Fair Carrying Fair Amount Value Amount Value -------- ----- -------- ----- INTEREST RATE Interest rate swaps U.S. dollars 44 44 2 37 FORWARD FOREIGN EXCHANGE CONTRACTS U.S. dollars (4) (4) - - - ---------------------------------------------------------------------------------------------------
At March 31, 2004, the notional principal amount for interest rate swaps was US$550 million (December 31, 2003 - US$500 million) and the principal amount of forward foreign exchange contracts was US$200 million (December 31, 2003 - nil). FIRST QUARTER REPORT 2004 TCPL [10 RISK MANAGEMENT With respect to continuing operations, TCPL's market, financial and counterparty risks remain substantially unchanged since December 31, 2003. For further information on risks, refer to Management's Discussion and Analysis in TCPL's 2003 Annual Report. CONTROLS AND PROCEDURES As of the end of the period covered by this quarterly report, TCPL's management, together with TCPL's President and Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the company's disclosure controls and procedures. Based on this evaluation, the President and Chief Executive Officer and the Chief Financial Officer of TCPL have concluded that the disclosure controls and procedures are effective. There were no changes in TCPL's internal control over financial reporting during the most recent fiscal quarter that have materially affected or are reasonably likely to materially affect TCPL's internal control over financial reporting. CRITICAL ACCOUNTING POLICY TCPL's critical accounting policy, which remains unchanged since December 31, 2003, is the use of regulatory accounting for its regulated operations. For further information on this critical accounting policy, refer to Management's Discussion and Analysis in TCPL's 2003 Annual Report. CRITICAL ACCOUNTING ESTIMATES Since a determination of many assets, liabilities, revenues and expenses is dependent upon future events, the preparation of the company's consolidated financial statements requires the use of estimates and assumptions which have been made using careful judgment. TCPL's critical accounting estimates from December 31, 2003 continue to be depreciation expense and certain deferred after-tax gains and remaining obligations related to the Gas Marketing business. For further information on these critical accounting estimates, refer to Management's Discussion and Analysis in TCPL's 2003 Annual Report. FIRST QUARTER REPORT 2004 TCPL [11 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 consist 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 that it is reasonable to assume all retirement costs associated with the regulated pipelines will be recovered through tolls in future periods. The plant, property and equipment in the power business consists primarily of power plants in Canada and the United States. The impact of this accounting change resulted in an increase of $6 million and $7 million in the estimated fair value of the liability for the power plants and associated assets 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 estimated fair value of the liability as at March 31, 2004 was $9 million. The company has no legal liability for asset retirement obligations with respect to its investment in Bruce Power and the Sundance A and B power purchase arrangements. The impact of this accounting change resulted in an increase of $2 million in the estimated fair value of the liability for TCPL's Other Gas Transmission assets as at January 1, 2003 and December 31, 2003. The estimated fair value of this liability as at March 31, 2004 was $2 million. The impact of this change on TCPL's net income in first quarter 2004 and prior periods was nil. FIRST QUARTER REPORT 2004 TCPL [12 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. In accordance with the provisions of this new guideline, TCPL has recorded all derivatives on the Consolidated Balance Sheet at fair value. This new guideline was applied prospectively and resulted in a decrease to first quarter 2004 net income of $2 million. The significant impact of the accounting change on the Consolidated Balance Sheet as at January 1, 2004 is as follows.
(unaudited - millions of dollars) Increase/(Decrease) - ------------------------------------------------- ------------------- Current Assets Other 8 Other Assets 123 ------------------- Total Assets 131 ------------------- Current Liabilities Accounts Payable 8 Deferred Amounts 132 Long-Term Debt (7) Future Income Taxes (1) ------------------- Total Liabilities 132 -------------------
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 generally accepted accounting principles (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. This accounting change was applied prospectively and there was no impact on net income in first quarter 2004. In prior periods, in accordance with industry practice, certain assets and liabilities related to the company's regulated activities, and offsetting deferral accounts, were not recorded on the balance sheet. The impact of the change on the consolidated balance sheet as at January 1, 2004 is as follows.
(unaudited - millions of dollars) Increase/(Decrease) - ------------------------------------------------- ------------------- Other Assets 153 ------------------- Deferred Amounts 80 Long-Term Debt 76 Preferred Securities (3) ------------------- Total Liabilities 153 -------------------
FIRST QUARTER REPORT 2004 TCPL [13 OUTLOOK In 2004, the outcome of the proposed acquisition of Gas Transmission Northwest Corporation (GTN) could have a positive impact on the expected results of the Gas Transmission segment. In addition, the sale of the ManChief and Curtis Palmer power facilities to Power LP could have a significant positive impact on Power's 2004 expected results. For further information on the acquisition and sale, please refer to Other Recent Developments. Excluding these impacts and the receipts of income tax refunds and refund interest in first quarter 2004, the company's outlook is relatively unchanged since December 31, 2003. For further information on outlook, refer to Management's Discussion and Analysis in TCPL's 2003 Annual Report. The company's net earnings and cash flow combined with a strong balance sheet continue to provide the financial flexibility for TCPL to make disciplined investments in its core businesses of Gas Transmission and Power. Credit ratings on TCPL's senior unsecured debt assigned by Dominion Bond Rating Service Limited (DBRS), Moody's Investors Service (Moody's) and Standard & Poor's are currently A, A2 and A-, respectively. DBRS and Moody's both maintain a `stable' outlook on their ratings and Standard & Poor's maintains a 'negative' outlook on its rating. OTHER RECENT DEVELOPMENTS GAS TRANSMISSION WHOLLY-OWNED PIPELINES ALBERTA SYSTEM In July 2003, TCPL, along with other utilities, filed evidence in the GCOC Proceeding with the EUB. TCPL has requested a return on equity of 11 per cent based on a deemed common equity of 40 per cent in its GCOC application. The EUB expects to adopt a standardized approach to determining the rate of return and capital structure for all utilities under its jurisdiction at the conclusion of this proceeding. The oral portion of the hearing was completed on January 16, 2004 with written argument and reply argument filed on February 23, 2004 and April 5, 2004, respectively. An EUB decision is expected in third quarter 2004. In September 2003, TCPL filed Phase I of the 2004 GRA with the EUB, consisting of evidence in support of the applied for rate base and revenue requirement. The company applied for a composite depreciation rate of 4.13 per cent compared to the current depreciation rate of 4.00 per cent. Phase II of the application, dealing primarily with rate design and services, was filed in December 2003. The EUB hearing to consider the GRA Phase I FIRST QUARTER REPORT 2004 TCPL [14 application began, in Calgary, on April 5, 2004, with the evidentiary portion concluding on April 14, 2004. Final argument and reply are due May 5, 2004 and May 26, 2004 respectively. A decision is expected in third quarter 2004. The Phase II hearing is scheduled to commence on June 8, 2004. In December 2003, the EUB approved TCPL's application to charge interim tolls for transportation service, effective January 1, 2004. Final tolls for 2004 will be determined based on the EUB decisions in the GCOC proceeding and in both phases of the proceeding regarding the GRA. CANADIAN MAINLINE In April 2004, the Federal Court of Appeal dismissed TCPL's appeal of the NEB's decision to deny TCPL's Fair Return Review and Variance Application, while endorsing TCPL's view of the law relating to the determination of a fair return by the NEB. The judgment has no impact on reported earnings for 2001, 2002 and 2003. In December 2003, the NEB approved interim tolls effective January 1, 2004 for the Canadian Mainline. The 2004 Tolls and Tariff Application for the Canadian Mainline was filed on January 26, 2004 and includes a request for an 11 per cent return on a 40 per cent deemed common equity component. Phase I of the hearing will consider all issues raised by the application, with the exception of cost of capital, and is expected to commence June 14, 2004 in Ottawa. The procedures for Phase II of the hearing, which will address cost of capital, have not yet been announced. OTHER GAS TRANSMISSION IROQUOIS In February 2004, the Iroquois pipeline began commercial operation of its Eastchester expansion. Iroquois' Eastchester expansion is the first major natural gas transmission pipeline to be built into New York City in approximately 40 years. NORTHERN DEVELOPMENT TCPL has been engaged in renewed discussions with the State of Alaska (the State) relating to the Alaskan portion of the Alaska Highway Pipeline Project. Further to these discussions, TCPL is prepared to assume a leadership position with respect to the development of an independently-owned pipeline project in Alaska, in addition to the company's long-standing leadership of the Canadian portion of the project. TCPL is open to the potential participation of Alaska Native corporations and other Alaskan entities. FIRST QUARTER REPORT 2004 TCPL [15 In April 2004, TCPL announced that it had signed a memorandum of understanding (MOU) with the State. In the MOU, TCPL has committed to file an application under the State's Stranded Gas Development Act, and the State will resume processing of TCPL's long-pending application for a right-of-way lease on State lands. TCPL holds the complementary rights-of-way on federal lands in the State. In the MOU, the State and TCPL recognize the critical importance of upstream fiscal negotiations between the State and the North Slope producers. Once a right-of-way lease has been issued by the State and commercial arrangements adequate to support financing are in place, TCPL would be prepared to convey the Alaska right-of-way lease to the corporation or partnership that would undertake construction of the project within Alaska. Such corporation or partnership could be owned in part by TCPL. A conveyance would be subject to an exclusive interconnection agreement with TCPL at the Alaska/Yukon border. LIQUEFIED NATURAL GAS In a referendum held on March 9, 2004, the residents of Harpswell, Maine voted against leasing a town-owned site to build the Fairwinds liquefied natural gas (LNG) regasification facility. As a result, TCPL and its partner ConocoPhillips Company suspended further work on this LNG project. GAS TRANSMISSION NORTHWEST CORPORATION As described in Management's Discussion and Analysis in TCPL's 2003 Annual Report, TCPL executed a Stock Purchase Agreement with National Energy & Gas Transmission, Inc., and certain of its subsidiaries (collectively, NEGT) to acquire GTN for US$1.7 billion, including US$0.5 billion of assumed debt, subject to closing adjustments. GTN owns and operates two pipeline systems - the Gas Transmission Northwest Pipeline System and the North Baja Pipeline System. On March 25, 2004, the bankruptcy court issued an order approving certain bidding procedures in connection with this sale. If, after the auction process contemplated by the Stock Purchase Agreement and the bidding procedures order, it is determined that TCPL's bid for GTN is the highest and otherwise best bid, the bankruptcy court shall hold a hearing, currently scheduled for May 12, 2004, to consider approval of the Stock Purchase Agreement. FIRST QUARTER REPORT 2004 TCPL [16 POWER SALE OF POWER FACILITIES TO TRANSCANADA POWER, L.P. On March 29, 2004, TCPL entered into an agreement to sell the ManChief and Curtis Palmer power facilities for US$402.6 million to Power LP. TCPL expects to recognize a gain of approximately $10 million after tax on the sale of these assets. The sale is subject to certain post closing adjustments, approval by Power LP's unitholders on April 29, 2004 and applicable regulatory approvals. TCPL expects to complete the sale of these assets on or about May 5, 2004. A wholly owned subsidiary of TCPL manages Power LP and the operation of the assets owned by Power LP, and currently owns 35.6 per cent of Power LP. Power LP expects to fund the transaction through an offering of 8.11 million subscription receipts which closed April 15, 2004 and a bridge loan facility from a Canadian chartered bank. As part of the subscription receipts offering, TCPL purchased 540,000 subscription receipts for an aggregate purchase price of approximately $20 million. Subsequent to the transaction being completed, TCPL's ownership interest in Power LP will be reduced to approximately 30.6 per cent. Power LP's unitholders will be asked at a special meeting to be held on April 29, 2004 to approve the acquisition and remove Power LP's obligation to redeem all units not owned by TCPL in 2017. As a result of the removal of the redemption obligation and the reduction in ownership interest, upon closing, TCPL expects to recognize a gain of approximately $165 million after tax. This amount primarily reflects the recognition of unamortized gains on previous Power LP transactions. MACKAY RIVER The MacKay River cogeneration plant, situated at Petro-Canada's MacKay River oilsands development, was declared contractually commercially in-service on February 1, 2004. However, normal commercial operations have not occurred on a sustained basis due to unresolved integration issues with the host site. The issues preventing normal commercial operations are expected to be resolved in second quarter 2004. SHARE INFORMATION As at March 31, 2004, TCPL had 480,668,109 issued and outstanding common shares. In addition, there were 4,000,000 Series U and 4,000,000 Series Y Cumulative First Preferred Shares issued and outstanding as at March 31, 2004. FORWARD-LOOKING INFORMATION Certain information in this quarterly report is forward-looking and is subject to important risks and uncertainties. The results or events predicted in this information may differ from actual results or events. Factors which could cause actual results or events to differ materially from current expectations include, among other things, the ability of TCPL to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits, the availability and price of energy commodities, regulatory decisions, competitive factors in the pipeline and power industry sectors, and the prevailing economic conditions in North America. For additional information on these and other factors, see the reports filed by TCPL with Canadian securities regulators and with the United States Securities and Exchange Commission. TCPL disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. EX-2 3 a2134694zex-2.txt EXHIBIT 2 EXHIBIT 2 FIRST QUARTER REPORT 2004 TCPL [17 CONSOLIDATED INCOME Three months ended March 31 (unaudited)
(millions of dollars) 2004 2003 - ------------------------------------------------------- ----- ----- REVENUES 1,233 1,336 OPERATING EXPENSES Cost of sales 127 180 Other costs and expenses 374 427 Depreciation 232 215 ----- ----- 733 822 ----- ----- OPERATING INCOME 500 514 OTHER EXPENSES/(INCOME) Financial charges 195 204 Financial charges of joint ventures 14 22 Equity income (58) (58) Interest and other income (15) (13) ----- ----- 136 155 ----- ----- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND NON-CONTROLLING INTERESTS 364 359 INCOME TAXES Current 107 62 Future 23 74 NON-CONTROLLING INTERESTS 6 - ----- ----- NET INCOME 228 223 PREFERRED SECURITIES CHARGES 8 9 PREFERRED SHARE DIVIDENDS 6 6 ----- ----- NET INCOME APPLICABLE TO COMMON SHARES 214 208 ----- ----- ----- -----
See accompanying Notes to the Consolidated Financial Statements. FIRST QUARTER REPORT 2004 TCPL [18 CONSOLIDATED CASH FLOWS Three months ended March 31 (unaudited)
(millions of dollars) 2004 2003 - ------------------------------------------------------- ----- ----- CASH GENERATED FROM OPERATIONS Net income 228 223 Depreciation 232 215 Future income taxes 23 74 Equity income in excess of distributions received (51) (51) Other (9) (4) ----- ----- Funds generated from operations 423 457 Increase in operating working capital (42) (8) ----- ----- Net cash provided by continuing operations 381 449 Net cash (used in)/provided by discontinued operations (2) 4 ----- ----- 379 453 ----- ----- INVESTING ACTIVITIES Capital expenditures (101) (76) Acquisitions, net of cash acquired - (409) Deferred amounts and other (45) (18) ----- ----- Net cash used in investing activities (146) (503) ----- ----- FINANCING ACTIVITIES Dividends and preferred securities charges (148) (139) Notes payable (repaid)/issued, net (229) 209 Long-term debt issued 665 - Reduction of long-term debt (476) (9) Non-recourse debt of joint ventures issued 6 17 Reduction of non-recourse debt of joint ventures (9) (16) Common shares issued - 16 ----- ----- Net cash (used in)/provided by financing activities (191) 78 ----- ----- INCREASE IN CASH AND SHORT-TERM INVESTMENTS 42 28 CASH AND SHORT-TERM INVESTMENTS Beginning of period 337 212 ----- ----- CASH AND SHORT-TERM INVESTMENTS End of period 379 240 ----- ----- ----- ----- SUPPLEMENTARY CASH FLOW INFORMATION Income taxes paid 161 55 Interest paid 172 190 ----- ----- ----- -----
See accompanying Notes to the Consolidated Financial Statements. FIRST QUARTER REPORT 2004 TCPL [19 CONSOLIDATED BALANCE SHEET
March 31, 2004 December 31, (millions of dollars) (unaudited) 2003 - ------------------------------------------------------------ -------------- ------------ ASSETS CURRENT ASSETS Cash and short-term investments 379 337 Accounts receivable 555 603 Inventories 161 165 Other 110 88 -------------- ------------ 1,205 1,193 LONG-TERM INVESTMENTS 782 733 PLANT, PROPERTY AND EQUIPMENT 17,336 17,460 OTHER ASSETS 1,483 1,164 -------------- ------------ 20,806 20,550 -------------- ------------ -------------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable 138 367 Accounts payable 955 1,069 Accrued interest 241 208 Current portion of long-term debt 489 550 Current portion of non-recourse debt of joint ventures 25 19 -------------- ------------ 1,848 2,213 DEFERRED AMOUNTS 642 475 LONG-TERM DEBT 9,835 9,465 FUTURE INCOME TAXES 434 427 NON-RECOURSE DEBT OF JOINT VENTURES 760 761 JUNIOR SUBORDINATED DEBENTURES 19 22 -------------- ------------ 13,538 13,363 -------------- ------------ NON-CONTROLLING INTERESTS 85 82 -------------- ------------ SHAREHOLDERS' EQUITY Preferred securities 672 672 Preferred shares 389 389 Common shares 4,632 4,632 Contributed surplus 268 267 Retained earnings 1,259 1,185 Foreign exchange adjustment (37) (40) -------------- ------------ 7,183 7,105 -------------- ------------ 20,806 20,550 -------------- ------------ -------------- ------------
See accompanying Notes to the Consolidated Financial Statements. FIRST QUARTER REPORT 2004 TCPL [20 CONSOLIDATED RETAINED EARNINGS Three months ended March 31 (unaudited)
(millions of dollars) 2004 2003 - ------------------------------------------------------------ ----- ---- Balance at beginning of period 1,185 854 Net income 228 223 Preferred securities charges (8) (9) Preferred share dividends (6) (6) Common share dividends (140) (129) ----- ---- 1,259 933 ----- ---- ----- ----
See accompanying Notes to the Consolidated Financial Statements. FIRST QUARTER REPORT 2004 TCPL [21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements of TransCanada PipeLines Limited (TCPL 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 TCPL's annual financial statements for the year ended December 31, 2003 except as stated below. 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 annual financial statements included in TCPL's 2003 Annual Report. Amounts are stated in Canadian dollars unless otherwise indicated. Certain comparative figures have been reclassified to conform with the current period'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. 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. 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. FIRST QUARTER REPORT 2004 TCPL [22 The plant, property and equipment of the regulated natural gas transmission operations consist 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 that it is reasonable to assume all retirement costs associated with the regulated pipelines will be recovered through tolls in future periods. The plant, property and equipment in the power business consists primarily of power plants in Canada and the United States. The impact of this accounting change resulted in an increase of $6 million and $7 million in the estimated fair value of the liability for the power plants and associated assets 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 estimated fair value of the liability as at March 31, 2004 was $9 million. The company has no legal liability for asset retirement obligations with respect to its investment in Bruce Power and the Sundance A and B power purchase arrangements. The impact of this accounting change resulted in an increase of $2 million in the estimated fair value of the liability for TCPL's Other Gas Transmission assets as at January 1, 2003 and December 31, 2003. The estimated fair value of this liability as at March 31, 2004 was $2 million. The impact of this change on TCPL's net income in first quarter 2004 and prior periods was nil. 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. In accordance with the provisions of this new guideline, TCPL has recorded all derivatives on the Consolidated Balance Sheet at fair value. This new guideline was applied prospectively and resulted in a decrease to first quarter 2004 net income of $2 million. The significant impact of the accounting change on the Consolidated Balance Sheet as at January 1, 2004 is as follows. FIRST QUARTER REPORT 2004 TCPL [23
(unaudited - millions of dollars) Increase/(Decrease) - --------------------------------------------------------- ------------------- Current Assets Other 8 Other Assets 123 ------------------- Total Assets 131 ------------------- Current Liabilities Accounts Payable 8 Deferred Amounts 132 Long-Term Debt (7) Future Income Taxes (1) ------------------- Total Liabilities 132 -------------------
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 generally accepted accounting principles (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. This accounting change was applied prospectively and there was no impact on net income in first quarter 2004. In prior periods, in accordance with industry practice, certain assets and liabilities related to the company's regulated activities, and offsetting deferral accounts, were not recorded on the balance sheet. The impact of the change on the consolidated balance sheet as at January 1, 2004 is as follows.
(unaudited - millions of dollars) Increase/(Decrease) - --------------------------------------------------------- ------------------- Other Assets 153 ------------------- Deferred Amounts 80 Long-Term Debt 76 Preferred Securities (3) ------------------- Total Liabilities 153 -------------------
FIRST QUARTER REPORT 2004 TCPL [24 3. SEGMENTED INFORMATION
GAS TRANSMISSION POWER CORPORATE TOTAL Three months ended March 31 ---------------- ------------ ------------ ------------- (unaudited - millions of dollars) 2004 2003 2004 2003 2004 2003 2004 2003 - --------------------------------------- ----- ---- ---- ---- ---- ---- ----- ----- Revenues 949 960 284 376 - - 1,233 1,336 Cost of sales - - (127) (180) - - (127) (180) Other costs and expenses (285) (304) (87) (121) (2) (2) (374) (427) Depreciation (212) (194) (20) (21) - - (232) (215) ----- ---- ---- ---- ---- ---- ----- ----- Operating income/(loss) 452 462 50 54 (2) (2) 500 514 Financial charges and non-controlling interests (192) (196) (2) (2) (21) (21) (215) (219) Financial charges of joint ventures (14) (22) - - - - (14) (22) Equity income 10 20 48 38 - - 58 58 Interest and other income 3 5 4 4 8 4 15 13 Income taxes (110) (111) (35) (31) 15 6 (130) (136) ----- ---- ---- ---- ---- ---- ----- ----- NET INCOME APPLICABLE TO COMMON SHARES 149 158 65 63 - (13) 214 208 ----- ---- ---- ---- ---- ---- ----- ----- ----- ---- ---- ---- ---- ---- ----- -----
March 31, 2004 December 31, (millions of dollars) (unaudited) 2003 - -------------------------------------------- -------------- ------------ Gas Transmission 16,908 16,974 Power 2,830 2,753 Corporate 1,058 812 -------------- ------------ Continuing Operations 20,796 20,539 Discontinued Operations 10 11 -------------- ------------ 20,806 20,550 -------------- ------------ -------------- ------------
4. RISK MANAGEMENT AND FINANCIAL INSTRUMENTS The following represents the material changes to the company's risk management and financial instruments since December 31, 2003. The tables reflect the impact of hedge accounting changes adopted prospectively, effective January 1, 2004, as further discussed under Note 2, Accounting Changes - Hedging Relationships. FOREIGN EXCHANGE AND INTEREST RATE MANAGEMENT ACTIVITY The company manages the foreign exchange risk of U.S. dollar debt, U.S. dollar expenses and the interest rate exposures of the Alberta System, the Canadian Mainline and the Foothills System through the use of foreign currency and interest rate derivatives. These derivatives are comprised of contracts for periods up to eight years. Certain of the realized gains and losses on interest rate derivatives are shared with shippers on predetermined terms. FIRST QUARTER REPORT 2004 TCPL [25
Asset/(Liability) March 31, 2004 (millions of dollars) (unaudited) December 31, 2003 - ------------------------------------ -------------------- -------------------- Carrying Fair Carrying Fair Amount Value Amount Value -------- ----- -------- ----- FOREIGN EXCHANGE Cross-currency swaps (21) (21) (26) (26) INTEREST RATE Interest rate swaps Canadian dollars 23 23 2 15 U.S. dollars 9 9 - 8 - ---------------------------------------------------------------------------------------
At March 31, 2004, the principal amounts of cross-currency swaps was US$282 million (December 31, 2003 - US$282 million). Notional principal amounts for interest rate swaps were $769 million (December 31, 2003 - $964 million) and US$100 million (December 31, 2003 - US$100 million). The company manages the foreign exchange risk and interest rate exposures of its other U.S. dollar debt through the use of foreign currency and interest rate derivatives. These derivatives are comprised of contracts for periods up to nine years. The fair values of the interest rate derivatives are shown in the table below.
Asset/(Liability) March 31, 2004 (millions of dollars) (unaudited) December 31, 2003 - ------------------------------------ -------------------- -------------------- Carrying Fair Carrying Fair Amount Value Amount Value -------- ----- -------- ----- INTEREST RATE Interest rate swaps U.S. dollars 44 44 2 37 FORWARD FOREIGN EXCHANGE CONTRACTS U.S. dollars (4) (4) - - - ---------------------------------------------------------------------------------------
At March 31, 2004, the notional principal amount for interest rate swaps was US$550 million (December 31, 2003 - US$500 million) and the principal amount of forward foreign exchange contracts was US$200 million (December 31, 2003 - nil). 5. ACQUISITION On February 24, 2004, TCPL announced an agreement to acquire Gas Transmission Northwest Corporation (GTN) from National Energy & Gas Transmission Inc. for approximately US$1.7 billion, including US$0.5 billion of assumed debt and subject to closing adjustments. GTN is a natural gas pipeline company that owns and operates two pipeline systems. The acquisition is subject to bankruptcy court approval, including completion of a court-sanctioned auction process, regulatory approval and an anti-trust review. FIRST QUARTER REPORT 2004 TCPL [26 6. SALE OF ASSETS On March 29, 2004, TCPL entered into an agreement to sell the ManChief and Curtis Palmer power facilities for US$402.6 million to Power LP. TCPL expects to recognize a gain of approximately $10 million after tax on the sale of these assets. The sale is subject to certain post closing adjustments, approval by Power LP's unitholders and applicable regulatory approvals. TCPL expects to complete the sale of these assets on or about May 5, 2004. Power LP's unitholders will be asked at a special meeting to be held on April 29, 2004 to approve the acquisition and to remove Power LP's obligation to redeem all units not owned by TCPL in 2017. Power LP expects to fund the transaction through an offering of 8.11 million subscription receipts which closed April 15, 2004 and a bridge loan facility from a Canadian chartered bank. As part of the subscription receipts offering, TCPL purchased 540,000 subscription receipts for an aggregate purchase price of approximately $20 million. Subsequent to the transaction being completed, TCPL's ownership interest in Power LP will be reduced from 35.6 per cent to approximately 30.6 per cent. TCPL expects the removal of the redemption obligation and the reduction in ownership interest will result in a gain of approximately $165 million after tax. This amount primarily reflects the recognition of unamortized gains on previous Power LP transactions. - ------------------------------------------------------------------------------- TCPL welcomes questions from shareholders and potential investors. Please telephone: Investor Relations, at 1-800-361-6522 (Canada and U.S. Mainland) or direct dial David Moneta/Debbie Stein at (403) 920-7911. The investor fax line is (403) 920-2457. Media Relations: Hejdi Feick/Kurt Kadatz at (403) 920-7859 Visit TCPL's Internet site at: http://www.transcanada.com - ------------------------------------------------------------------------------- EX-3 4 a2134694zex-3.txt EXHIBIT 3 Exhibit 3 TransCanada PipeLines Limited EARNINGS COVERAGE MARCH 31, 2004 The following financial ratios have been calculated on a consolidated basis for the respective 12 month period ended March 31, 2004 and are based on unaudited financial information. The financial ratios have been calculated based on financial information prepared in accordance with Canadian generally accepted accounting principles. The following ratios have been prepared based on net income:
MARCH 31, 2004 -------------- Earnings coverage on long-term debt (1).......................... 2.74 times Earnings coverage on long-term debt and First Preferred Shares (1).................................... 2.63 times
(1) The above ratios have been calculated without including the annual carrying charges relating to the equity component of TransCanada's outstanding preferred securities. If the equity component of the preferred securities were classified as debt, the entire carrying charges of the preferred securities would be included in interest expense and dividends. If these annual carrying charges had been included in the calculations, the earnings coverage on long-term debt would have been 2.59 times for the 12 month period ended March 31, 2004 and the earnings coverage on long-term debt and First Preferred Shares would have been 2.49 times for the 12 month period ended March 31, 2004. The following ratios have been prepared based on net income from continuing operations:
MARCH 31, 2004 -------------- Earnings coverage on long-term debt (2).......................... 2.64 times Earnings coverage on long-term debt and First Preferred Shares (2).................................... 2.54 times
(2) The above ratios have been calculated without including the annual carrying charges relating to the equity component of TransCanada's outstanding preferred securities. If the equity component of the preferred securities were classified as debt, the entire carrying charges of the preferred securities would be included in interest expense and dividends. If these annual carrying charges had been included in the calculations, the earnings coverage on long-term debt would have been 2.50 times for the 12 month period ended March 31, 2004 and the earnings coverage on long-term debt and First Preferred Shares would have been 2.41 times for the 12 month period ended March 31, 2004. EX-4 5 a2134694zex-4.txt EXHIBIT 4 EXHIBIT 4 TRANSCANADA PIPELINES LIMITED U.S. GAAP CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) CONDENSED STATEMENT OF CONSOLIDATED INCOME AND COMPREHENSIVE INCOME IN ACCORDANCE WITH U.S. GAAP(1)
Three months ended March 31 --------------------------- (MILLIONS OF DOLLARS) 2004 2003 - ------------------------------------------------------------------------- --------- ----------- Revenues(2) 1,143 1,177 --------- ----------- Cost of sales(2) 104 151 Other costs and expenses 387 422 Depreciation 212 185 --------- ----------- 703 758 --------- ----------- Operating income 440 419 Other (income)/expenses Equity income(1)(3)(4) (109) (119) Other expenses(4)(5)(6) 204 214 Income taxes 126 123 --------- ----------- 221 218 --------- ----------- Income before cumulative effect of the application of accounting changes in accordance with U.S. GAAP 219 201 Cumulative effect of the application of accounting changes, net of tax(2) - (13) --------- ----------- NET INCOME IN ACCORDANCE WITH U.S. GAAP 219 188 Adjustments affecting comprehensive income under U.S. GAAP Foreign currency translation adjustment, net of tax(7) 3 (15) Changes in minimum pension liability, net of tax(8) 25 3 Unrealized (loss)/gain on derivatives, net of tax(4) (13) 8 --------- ----------- COMPREHENSIVE INCOME IN ACCORDANCE WITH U.S. GAAP 234 184 --------- ----------- --------- -----------
RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS
Three months ended March 31 --------------------- (MILLIONS OF DOLLARS) 2004 2003 - ------------------------------------------------------------------------- ---- ---- Net income from continuing operations in accordance with Canadian GAAP 228 223 U.S. GAAP adjustments Preferred securities charges(5) (12) (14) Tax impact of preferred securities charges 4 5 Unrealized loss on foreign exchange and interest rate derivatives(4) (4) (6) Tax impact of loss on foreign exchange and interest rate derivatives 1 2 Unrealized gain/(loss) on energy trading contracts(2) 4 (11) Tax impact of unrealized gain/(loss) on energy trading contracts (1) 4 Equity loss(3) (1) (3) Tax impact of equity loss - 1 ---- ---- Income from continuing operations in accordance with U.S. GAAP 219 201 ---- ---- ---- ----
Page 1 of 5 CONDENSED BALANCE SHEET IN ACCORDANCE WITH U.S. GAAP(1)
March 31, December 31, (MILLIONS OF DOLLARS) 2004 2003 - ---------------------------------------------------------------- ----------------- ---------------- Current assets 1,031 1,017 Long-term investments(3)(9) 1,826 1,760 Plant, property and equipment 15,665 15,798 Regulatory asset(10) 2,632 2,721 Other assets(4) 1,379 1,192 ----------------- ---------------- 22,533 22,488 ----------------- ---------------- ----------------- ---------------- Current liabilities(11) 1,770 2,117 Deferred amounts(2)(4)(9) 794 741 Long-term debt(4) 9,908 9,494 Deferred income taxes(10) 2,963 3,039 Preferred securities(12) 603 694 Non-controlling interests 85 82 Shareholders' equity 6,410 6,321 ----------------- ---------------- 22,533 22,488 ----------------- ---------------- ----------------- ----------------
STATEMENT OF OTHER COMPREHENSIVE INCOME IN ACCORDANCE WITH U.S. GAAP
Cumulative Minimum Cash Flow Translation Pension Liability Hedges (MILLIONS OF DOLLARS) Account (SFAS No. 87) (SFAS No. 133) Total - ---------------------------------------------------------- --------------- ------------------ ---------------- --------- Balance at January 1, 2004 (40) (98) (5) (143) Changes in minimum pension liability, net of tax of $(13)(8) - 25 - 25 Unrealized loss on derivatives, net of tax of $7(4) - - (13) (13) Foreign currency translation adjustment, net of tax of $6(7) 3 - - 3 --------------- ------------------ ---------------- --------- BALANCE AT MARCH 31, 2004 (37) (73) (18) (128) --------------- ------------------ ---------------- --------- --------------- ------------------ ---------------- --------- Balance at January 1, 2003 14 (96) (13) (95) Changes in minimum pension liability, net of tax of $(1)(8) - 3 - 3 Unrealized gain on derivatives, net of tax of nil(4) - - 8 8 Foreign currency translation adjustment, net of tax of $(21)(7) (15) - - (15) --------------- ------------------ ---------------- --------- Balance at March 31, 2003 (1) (93) (5) (99) --------------- ------------------ ---------------- --------- --------------- ------------------ ---------------- ---------
(1) In accordance with U.S. GAAP, the Condensed Statement of Consolidated Income and Balance Sheet are prepared using the equity method of accounting for joint ventures. Excluding the impact of other U.S. GAAP adjustments, the use of the proportionate consolidation method of accounting for joint ventures, as required under Canadian GAAP, results in the same net income and Shareholders' Equity. Page 2 of 5 (2) Substantially all of the energy trading contracts are now accounted for as hedges under U.S. and Canadian GAAP. The energy trading contracts that qualified as hedges were accounted for as hedges under the provisions of Statement of Financial Accounting Standards (SFAS) No. 133. All gains or losses on the contracts that did not qualify as hedges, and the amounts of any ineffectiveness on the hedging contracts, are included in income each period. Substantially all of the amounts recorded in 2004 and 2003 as differences between U.S. and Canadian GAAP relate to gains and losses on contracts for periods before they were documented as hedges for purposes of U.S. GAAP. (3) Under Canadian GAAP, pre-operating costs incurred during the commissioning phase of a new project are deferred until commercial production levels are achieved. After such time, those costs are amortized over the estimated life of the project. Under U.S. GAAP, such costs are expensed as incurred. Certain start-up costs incurred by Bruce Power L.P. (an equity investment) are required to be expensed under U.S. GAAP. (4) Effective January 1, 2004, all foreign exchange and interest rate derivatives are recorded in the Company's Consolidated Financial Statements at fair value under Canadian GAAP. Under the provisions of SFAS No. 133 "Accounting for Derivatives and Hedging Activities", all derivatives are recognized as assets and liabilities on the balance sheet and measured at fair value. For derivatives designated as fair value hedges, changes in the fair value are recognized in earnings together with an equal or lesser amount of changes in the fair value of the hedged item attributable to the hedged risk. For derivatives designated as cash flow hedges, changes in the fair value of the derivatives that are effective in offsetting the hedged risk are recognized in other comprehensive income until the hedged item is recognized in earnings. Any ineffective portion of the change in fair value is recognized in earnings each period. Substantially all of the amounts recorded in 2004 as differences between U.S. and Canadian GAAP, for income from continuing operations, relate to the differences in accounting treatment with respect to the hedged items and, for comprehensive income, relate to cash flow hedges. (5) Under U.S. GAAP, the financial charges related to preferred securities are recognized as an expense, rather than dividends. (6) Other expenses included an allowance for funds used during construction of $1 million for the three months ended March 31, 2004 (March 31, 2003 - $1 million). (7) Under U.S. GAAP, changes in the foreign currency translation adjustment account must be recorded as a component of comprehensive income. (8) Under U.S. GAAP, a net loss recognized pursuant to SFAS No. 87 "Employers' Accounting for Pensions" as an additional pension liability not yet recognized as net period pension cost, must be recorded as a component of comprehensive income. The components of net benefit cost recognized for the Company's defined benefit pension plans and other post-employment benefit plans for the three months ended March 31 are as follows.
PENSION BENEFIT OTHER BENEFIT PLANS PLANS ------------------- ------------------- (MILLIONS OF DOLLARS) 2004 2003 2004 2003 ---------------------------------------------------------- ------- -------- -------- -------- Current service cost 7 6 - - Interest cost 14 13 1 1 Expected return on plan assets (14) (13) - - Amortization of transitional obligation related to regulated business - - 1 1 Amortization of net actuarial loss 3 2 1 1 Amortization of past service cost 1 1 - - ------- -------- -------- -------- Net benefit cost recognized 11 9 3 3 ------- -------- -------- -------- ------- -------- -------- --------
Page 3 of 5 (9) Effective January 1, 2003, the Company adopted the provisions of Financial Interpretation (FIN) 45 that require the recognition of a liability for the fair value of certain guarantees that require payments contingent on specified types of future events. The measurement standards of FIN 45 are applicable to guarantees entered into after January 1, 2003. For U.S. GAAP purposes, the fair value of guarantees recorded as a liability at March 31, 2004 was $10 million (December 31, 2003 - $4 million) and relates to the Company's equity interest in Bruce Power L.P. (10) Under U.S. GAAP, the Company is required to record a deferred income tax liability for its cost-of-service regulated businesses. As these deferred income taxes are recoverable through future revenues, a corresponding regulatory asset is recorded for U.S. GAAP purposes. (11) Current liabilities at March 31, 2004 include dividends payable of $146 million (December 31, 2003 - $136 million) and current taxes payable of $217 million (December 31, 2003 - $271 million). (12) Under U.S. GAAP, the preferred securities are classified as a liability. The fair value of the preferred securities at March 31, 2004 was $624 million (December 31, 2003 - $612 million). The Company made preferred securities charges payments of $12 million for the three months ended March 31, 2004 (March 31, 2003 - $14 million). (13) The Company's Statement of Consolidated Cash Flows under U.S. GAAP would be identical to that under Canadian GAAP except that the preferred securities charges would be classified with funds generated from continuing operations. (14) Effective December 31, 2003, the Company adopted the provisions of FIN 46 (Revised) "Consolidation of Variable Interest Entities" that requires the consolidation of certain entities that are controlled through financial interests that indicate control (referred to as `variable interests'). Adopting these provisions has had no impact on the U.S. GAAP financial statements of the Company. Page 4 of 5 SUMMARIZED FINANCIAL INFORMATION OF LONG-TERM INVESTMENTS(15)
Three months ended March 31 ----------------------------- (MILLIONS OF DOLLARS) 2004 2003 - -------------------------------------------------------------------------------- ------------ ----------- INCOME Revenues 275 280 Other costs and expenses (119) (105) Depreciation (33) (38) Financial charges and other (15) (25) ------------ ----------- Proportionate share of income before income taxes of long-term investments 108 112 ------------ ----------- ------------ -----------
March 31, December 31, (MILLIONS OF DOLLARS) 2004 2003 - ----------------------------------------------------------------- ------------------ ----------------- BALANCE SHEET Current assets 317 385 Plant, property and equipment 3,048 2,944 Current liabilities (185) (204) Deferred amounts (net) (291) (286) Non-recourse debt (1,052) (1,060) Deferred income taxes (17) (19) ------------------ ----------------- Proportionate share of net assets of long-term investments 1,820 1,760 ------------------ ----------------- ------------------ -----------------
(15) This includes those investments that are accounted for by the equity method under U.S. GAAP (including those that are accounted for by the proportionate consolidation method under Canadian GAAP). Page 5 of 5 EX-5 6 a2134694zex-5.txt EXHIBIT 5 Exhibit 5 Alberta Securities Commission British Columbia Securities Commission The Manitoba Securities Commission Office of the Administrator, New Brunswick Securities Commission of Newfoundland Registrar of Securities, Northwest Territories Nova Scotia Securities Commission Registrar of Securities, Nunavut Ontario Securities Commission Registrar of Securities, Prince Edward Island Autorite des Marches Financiers Saskatchewan Securities Commission Registrar of Securities, Government of the Yukon Territory April 28, 2004 Dear Sirs TRANSCANADA PIPELINES LIMITED (THE "COMPANY") We refer to the short form prospectus of the Company dated November 20, 2002 relating to the sale and issue of $2,000,000,000 Common Shares, Preferred Shares or Debt Securities of the Company as supplemented by a prospectus supplement dated November 29, 2002 relating to the sale and issue of Medium Term Note Debentures (Unsecured), collectively the "Prospectus". We are the auditors of the Company and under date of February 23, 2004, we reported on the following financial statements incorporated by reference in the Prospectus: o Consolidated balance sheets as at December 31, 2003 and December 31, 2002; and o Consolidated statements of income, retained earnings and cash flows for each of the years in the three-year period ended December 31, 2003. Also incorporated by reference in the Prospectus are the following unaudited interim financial statements, which have been filed with the securities regulatory authorities: o Consolidated balance sheet as at March 31, 2004; o Consolidated statements of income and cash flows for the three-month periods ended March 31, 2004 and 2003; and o Consolidated statements of retained earnings for the three-month periods ended March 31, 2004 and 2003. Page 2 April 28, 2004 We have not audited any financial statements of the Company as at any date or for any period subsequent to December 31, 2003. Although we have performed an audit for the year ended December 31, 2003, the purpose and therefore the scope of the audit was to enable us to express our opinion on the consolidated financial statements as at December 31, 2003 and for the year then ended, but not on the financial statements for any interim period within that year. Therefore, we are unable to and do not express an opinion on the above-mentioned unaudited interim consolidated financial statements or on the financial position, results of operations or cash flows as at any date or for any period subsequent to December 31, 2003. We have, however, performed a review of the unaudited interim consolidated financial statements of the Company as at March 31, 2004 and for the three-month periods ended March 31, 2004 and 2003. We performed our review in accordance with Canadian generally accepted standards for a review of interim financial statements by an entity's auditors. Such an interim review consists principally of applying analytical procedures to financial data and making inquiries of, and having discussions with, persons responsible for financial and accounting matters. An interim review is substantially less in scope than an audit, whose objective is the expression of an opinion regarding the financial statements. An interim review does not provide assurance that we would become aware of any, or all, significant matters that might be identified in an audit. Based on our review, we are not aware of any material modification that needs to be made for these interim consolidated financial statements to be in accordance with Canadian generally accepted accounting principles. This letter is provided solely for the purpose of assisting the securities regulatory authorities to which it is addressed in discharging their responsibilities and should not be used for any other purpose. Any use that a third party makes of this letter or any reliance or decisions based on it, are the responsibility of such third parties. We accept no responsibility for loss or damages, if any, suffered by any third party as a result of decisions made or actions taken based on this letter. Yours very truly /s/ KPMG LLP Chartered Accountants Calgary, Canada April 28, 2004 EX-6 7 a2134694zex-6.txt EXHIBIT 6 EXHIBIT 6 CERTIFICATIONS I, Harold N. Kvisle, certify that: 1. I have reviewed this quarterly report on Form 6-K of TransCanada PipeLines Limited; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Harold N. Kvisle ------------------------------------- Dated April 28, 2004 Harold N. Kvisle President and Chief Executive Officer EX-7 8 a2134694zex-7.txt EXHIBIT 7 EXHIBIT 7 CERTIFICATIONS I, Russell K. Girling, certify that: 1. I have reviewed this quarterly report on Form 6-K of TransCanada PipeLines Limited; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Russell K. Girling ----------------------------------------------- Dated April 28, 2004 Russell K. Girling Executive Vice-President, Corporate Development and Chief Financial Officer EX-8 9 a2134694zex-8.txt EXHIBIT 8 EXHIBIT 8 TRANSCANADA PIPELINES LIMITED 450 - 1st Street S.W. Calgary, Alberta, Canada T2P 5H1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER REGARDING PERIODIC REPORT CONTAINING FINANCIAL STATEMENTS I, Harold N. Kvisle, the Chief Executive Officer of TransCanada PipeLines Limited (the "Company"), in compliance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify, in connection with the Company's Quarterly Report as filed on Form 6-K for the period ended March 31, 2004 with the Securities and Exchange Commission (the "Report"), that: 1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Harold N. Kvisle --------------------------- Harold N. Kvisle Chief Executive Officer April 28, 2004 EX-9 10 a2134694zex-9.txt EXHIBIT 9 EXHIBIT 9 TRANSCANADA PIPELINES LIMITED 450 - 1st Street S.W. Calgary, Alberta, Canada T2P 5H1 CERTIFICATION OF CHIEF FINANCIAL OFFICER REGARDING PERIODIC REPORT CONTAINING FINANCIAL STATEMENTS I, Russell K. Girling, the Chief Financial Officer of TransCanada PipeLines Limited (the "Company"), in compliance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify, in connection with the Company's Quarterly Report as filed on Form 6-K for the period ended March 31, 2004 with the Securities and Exchange Commission (the "Report"), that: 1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Russell K. Girling --------------------------- Russell K. Girling Chief Financial Officer April 28, 2004 -----END PRIVACY-ENHANCED MESSAGE-----