Exhibit 4.209




 




Consolidated Income




 




	

  (unaudited)


  (millions of dollars except per share amounts)


  	

   


  	

  Three months ended

  December 31


  	

   


  	

  Year ended December 31


  	

   


  
	

   


  	

  2002


  	

   


  	

  2001


  	

   


  	

  2002


  	

   


  	

  2001


  	

   


  
	

  Revenues


  	

   


  	

  1,338


  	

   


  	

  1,279


  	

   


  	

  5,214


  	

   


  	

  5,275


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Expenses


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Operating

  expenses


  	

   


  	

  584


  	

   


  	

  548


  	

   


  	

  2,173


  	

   


  	

  2,330


  	

   


  
	

  Depreciation


  	

   


  	

  217


  	

   


  	

  204


  	

   


  	

  848


  	

   


  	

  793


  	

   


  
	

   


  	

   


  	

  801


  	

   


  	

  752


  	

   


  	

  3,021


  	

   


  	

  3,123


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Operating Income


  	

   


  	

  537


  	

   


  	

  527


  	

   


  	

  2,193


  	

   


  	

  2,152


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Other Expenses/(Income)


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Financial

  charges


  	

   


  	

  215


  	

   


  	

  225


  	

   


  	

  867


  	

   


  	

  889


  	

   


  
	

  Financial

  charges of joint ventures


  	

   


  	

  23


  	

   


  	

  29


  	

   


  	

  90


  	

   


  	

  107


  	

   


  
	

  Interest

  and other income


  	

   


  	

  (24


  	

  )


  	

  (14


  	

  )


  	

  (86


  	

  )


  	

  (77


  	

  )


  
	

   


  	

   


  	

  214


  	

   


  	

  240


  	

   


  	

  871


  	

   


  	

  919


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Income from Continuing Operations before Income Taxes


  	

   


  	

  323


  	

   


  	

  287


  	

   


  	

  1,322


  	

   


  	

  1,233


  	

   


  
	

  Income Taxes - Current and Future


  	

   


  	

  128


  	

   


  	

  106


  	

   


  	

  517


  	

   


  	

  480


  	

   


  
	

  Net Income from Continuing Operations


  	

   


  	

  195


  	

   


  	

  181


  	

   


  	

  805


  	

   


  	

  753


  	

   


  
	

  Net Income/(Loss) from Discontinued Operations


  	

   


  	

  —


  	

   


  	

  20


  	

   


  	

  —


  	

   


  	

  (67


  	

  )


  
	

  Net Income


  	

   


  	

  195


  	

   


  	

  201


  	

   


  	

  805


  	

   


  	

  686


  	

   


  
	

  Preferred Securities Charges


  	

   


  	

  10


  	

   


  	

  10


  	

   


  	

  36


  	

   


  	

  45


  	

   


  
	

  Preferred Share Dividends


  	

   


  	

  5


  	

   


  	

  5


  	

   


  	

  22


  	

   


  	

  22


  	

   


  
	

  Net Income Applicable to Common Shares


  	

   


  	

  180


  	

   


  	

  186


  	

   


  	

  747


  	

   


  	

  619


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Net Income/(Loss) Applicable to Common Shares


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Continuing

  operations


  	

   


  	

  180


  	

   


  	

  166


  	

   


  	

  747


  	

   


  	

  686


  	

   


  
	

  Discontinued

  operations


  	

   


  	

  —


  	

   


  	

  20


  	

   


  	

  —


  	

   


  	

  (67


  	

  )


  
	

   


  	

   


  	

  180


  	

   


  	

  186


  	

   


  	

  747


  	

   


  	

  619


  	

   


  
	

  Net Income/(Loss) Per Share 


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Continuing

  operations


  	

   


  	

  $


  	

  0.37


  	

   


  	

  $


  	

  0.35


  	

   


  	

  $


  	

  1.56


  	

   


  	

  $


  	

  1.44


  	

   


  
	

  Discontinued

  operations


  	

   


  	

  —


  	

   


  	

  0.05


  	

   


  	

  —


  	

   


  	

  (0.14


  	

  )


  
	

  Basic


  	

   


  	

  $


  	

  0.37


  	

   


  	

  $


  	

  0.40


  	

   


  	

  $


  	

  1.56


  	

   


  	

  $


  	

  1.30


  	

   


  
	

  Diluted


  	

   


  	

  $


  	

  0.37


  	

   


  	

  $


  	

  0.40


  	

   


  	

  $


  	

  1.55


  	

   


  	

  $


  	

  1.30


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Average Shares Outstanding - Basic (millions)


  	

   


  	

  479.3


  	

   


  	

  476.5


  	

   


  	

  478.3


  	

   


  	

  475.8


  	

   


  
	

  Average Shares Outstanding - Diluted (millions)


  	

   


  	

  481.7


  	

   


  	

  478.4


  	

   


  	

  480.7


  	

   


  	

  477.6


  	

   


  





 




See accompanying Notes to the

Consolidated Financial Statements.




 




 













 




Consolidated Cash Flows




 




	

  (unaudited)


  (millions of dollars)


  	

   


  	

  Three months ended

  December 31


  	

   


  	

  Year ended December 31


  	

   


  
	

   


  	

  2002


  	

   


  	

  2001


  	

   


  	

  2002


  	

   


  	

  2001


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Cash Generated From Operations


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Net

  income from continuing operations


  	

   


  	

  195


  	

   


  	

  181


  	

   


  	

  805


  	

   


  	

  753


  	

   


  
	

  Depreciation


  	

   


  	

  217


  	

   


  	

  204


  	

   


  	

  848


  	

   


  	

  793


  	

   


  
	

  Future

  income taxes


  	

   


  	

  67


  	

   


  	

  6


  	

   


  	

  247


  	

   


  	

  127


  	

   


  
	

  Other


  	

   


  	

  (12


  	

  )


  	

  (30


  	

  )


  	

  (73


  	

  )


  	

  (49


  	

  )


  
	

  Funds

  generated from continuing operations


  	

   


  	

  467


  	

   


  	

  361


  	

   


  	

  1,827


  	

   


  	

  1,624


  	

   


  
	

  Decrease

  in operating working capital


  	

   


  	

  101


  	

   


  	

  99


  	

   


  	

  33


  	

   


  	

  170


  	

   


  
	

  Net

  cash provided by continuing operations


  	

   


  	

  568


  	

   


  	

  460


  	

   


  	

  1,860


  	

   


  	

  1,794


  	

   


  
	

  Net

  cash provided by/(used in) discontinued operations


  	

   


  	

  29


  	

   


  	

  4


  	

   


  	

  59


  	

   


  	

  (659


  	

  )


  
	

   


  	

   


  	

  597


  	

   


  	

  464


  	

   


  	

  1,919


  	

   


  	

  1,135


  	

   


  
	

  Investing Activities


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Capital

  expenditures


  	

   


  	

  (202


  	

  )


  	

  (174


  	

  )


  	

  (599


  	

  )


  	

  (492


  	

  )


  
	

  Acquisitions,

  net of cash acquired


  	

   


  	

  (209


  	

  )


  	

  (110


  	

  )


  	

  (228


  	

  )


  	

  (585


  	

  )


  
	

  Disposition

  of assets


  	

   


  	

  —


  	

   


  	

  216


  	

   


  	

  —


  	

   


  	

  1,170


  	

   


  
	

  Deferred

  amounts and other


  	

   


  	

  (103


  	

  )


  	

  (7


  	

  )


  	

  (115


  	

  )


  	

  30


  	

   


  
	

  Net

  cash (used in)/provided by investing activities


  	

   


  	

  (514


  	

  )


  	

  (75


  	

  )


  	

  (942


  	

  )


  	

  123


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Financing Activities


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Dividends

  and preferred securities charges


  	

   


  	

  (139


  	

  )


  	

  (138


  	

  )


  	

  (546


  	

  )


  	

  (517


  	

  )


  
	

  Notes

  payable issued/(repaid), net


  	

   


  	

  182


  	

   


  	

  336


  	

   


  	

  (46


  	

  )


  	

  186


  	

   


  
	

  Reduction

  of long-term debt


  	

   


  	

  (256


  	

  )


  	

  (164


  	

  )


  	

  (486


  	

  )


  	

  (793


  	

  )


  
	

  Non-recourse

  debt of joint ventures issued


  	

   


  	

  20


  	

   


  	

  5


  	

   


  	

  44


  	

   


  	

  23


  	

   


  
	

  Reduction

  of non-recourse debt of joint ventures


  	

   


  	

  (29


  	

  )


  	

  (85


  	

  )


  	

  (80


  	

  )


  	

  (132


  	

  )


  
	

  Common

  shares issued


  	

   


  	

  7


  	

   


  	

  5


  	

   


  	

  50


  	

   


  	

  24


  	

   


  
	

  Partnership

  units of joint ventures issued


  	

   


  	

  —


  	

   


  	

  59


  	

   


  	

  —


  	

   


  	

  59


  	

   


  
	

  Preferred

  securities redeemed


  	

   


  	

  —


  	

   


  	

  (318


  	

  )


  	

  —


  	

   


  	

  (318


  	

  )


  
	

  Net

  cash used in financing activities


  	

   


  	

  (215


  	

  )


  	

  (300


  	

  )


  	

  (1,064


  	

  )


  	

  (1,468


  	

  )


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

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


  	

   


  	

  (132


  	

  )


  	

  89


  	

   


  	

  (87


  	

  )


  	

  (210


  	

  )


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Cash and Short-Term Investments


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Beginning

  of period


  	

   


  	

  344


  	

   


  	

  210


  	

   


  	

  299


  	

   


  	

  509


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Cash and Short-Term Investments


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  End

  of period


  	

   


  	

  212


  	

   


  	

  299


  	

   


  	

  212


  	

   


  	

  299


  	

   


  





 




See accompanying Notes to the Consolidated

Financial Statements.




 




 













 




Consolidated

Balance Sheet




 




	

  (unaudited)


  December 31 (millions of dollars)


  	

   


  	

  2002


  	

   


  	

  2001


  	

   


  
	

  ASSETS


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Current Assets


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Cash

  and short-term investments


  	

   


  	

  212


  	

   


  	

  299


  	

   


  
	

  Accounts

  receivable


  	

   


  	

  691


  	

   


  	

  655


  	

   


  
	

  Inventories


  	

   


  	

  178


  	

   


  	

  177


  	

   


  
	

  Other


  	

   


  	

  102


  	

   


  	

  43


  	

   


  
	

   


  	

   


  	

  1,183


  	

   


  	

  1,174


  	

   


  
	

  Long-Term Investments


  	

   


  	

  291


  	

   


  	

  268


  	

   


  
	

  Plant, Property and Equipment


  	

   


  	

  17,496


  	

   


  	

  17,685


  	

   


  
	

  Other Assets


  	

   


  	

  946


  	

   


  	

  827


  	

   


  
	

   


  	

   


  	

  19,916


  	

   


  	

  19,954


  	

   


  
	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  LIABILITIES AND SHAREHOLDERS’ EQUITY


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Current Liabilities


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Notes

  payable


  	

   


  	

  297


  	

   


  	

  343


  	

   


  
	

  Accounts

  payable


  	

   


  	

  902


  	

   


  	

  786


  	

   


  
	

  Accrued

  interest


  	

   


  	

  227


  	

   


  	

  233


  	

   


  
	

  Current

  portion of long-term debt


  	

   


  	

  517


  	

   


  	

  483


  	

   


  
	

  Current

  portion of non-recourse debt of joint ventures


  	

   


  	

  75


  	

   


  	

  44


  	

   


  
	

  Provision

  for loss on discontinued operations


  	

   


  	

  234


  	

   


  	

  264


  	

   


  
	

   


  	

   


  	

  2,252


  	

   


  	

  2,153


  	

   


  
	

  Deferred Amounts


  	

   


  	

  353


  	

   


  	

  393


  	

   


  
	

  Long-Term Debt


  	

   


  	

  8,815


  	

   


  	

  9,347


  	

   


  
	

  Future Income Taxes


  	

   


  	

  226


  	

   


  	

  39


  	

   


  
	

  Non-Recourse Debt of Joint Ventures


  	

   


  	

  1,222


  	

   


  	

  1,295


  	

   


  
	

  Junior Subordinated Debentures


  	

   


  	

  238


  	

   


  	

  237


  	

   


  
	

   


  	

   


  	

  13,106


  	

   


  	

  13,464


  	

   


  
	

  Shareholders’ Equity


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

  Preferred

  securities


  	

   


  	

  674


  	

   


  	

  675


  	

   


  
	

  Preferred

  shares


  	

   


  	

  389


  	

   


  	

  389


  	

   


  
	

  Common

  shares


  	

   


  	

  4,614


  	

   


  	

  4,564


  	

   


  
	

  Contributed

  surplus


  	

   


  	

  265


  	

   


  	

  263


  	

   


  
	

  Retained

  earnings


  	

   


  	

  854


  	

   


  	

  586


  	

   


  
	

  Foreign

  exchange adjustment


  	

   


  	

  14


  	

   


  	

  13


  	

   


  
	

   


  	

   


  	

  6,810


  	

   


  	

  6,490


  	

   


  
	

   


  	

   


  	

  19,916


  	

   


  	

  19,954


  	

   


  





 




See accompanying Notes to the Consolidated

Financial Statements.




 




 













 




Consolidated

Retained Earnings




 




	

  (unaudited)


  (millions of dollars)


  	

   


  	

  Year ended December 31


  	

   


  
	

   


  	

  2002


  	

   


  	

  2001


  	

   


  
	

  Balance

  at beginning of period


  	

   


  	

  586


  	

   


  	

  395


  	

   


  
	

  Net

  income


  	

   


  	

  805


  	

   


  	

  686


  	

   


  
	

  Preferred

  securities charges


  	

   


  	

  (36


  	

  )


  	

  (45


  	

  )


  
	

  Preferred

  share dividends


  	

   


  	

  (22


  	

  )


  	

  (22


  	

  )


  
	

  Common

  share dividends


  	

   


  	

  (479


  	

  )


  	

  (428


  	

  )


  
	

   


  	

   


  	

  854


  	

   


  	

  586


  	

   


  





 




See accompanying Notes to the Consolidated

Financial Statements.




 




 













 




Notes

to Consolidated Financial Statements


(Unaudited)




 




1. Significant Accounting Policies




 




The consolidated financial statements of

TransCanada PipeLines Limited (TransCanada or the company) have been prepared

in accordance with Canadian generally accepted accounting principles. The

accounting policies applied are consistent with those outlined in the company’s

annual financial statements for the year ended December 31, 2001 except as

stated below.  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 TransCanada’s 2001 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.




 




Regulation




 




In June 2002, the company received the

National Energy Board (NEB) decision on its Fair Return application (Fair

Return decision) to determine the cost of capital to be included in the

calculation of 2001 and 2002 final tolls on its Canadian Mainline.  The Fair Return decision on the cost of

capital included an increase in the deemed common equity ratio from 30 to 33

per cent effective January 1, 2001.  The

NEB also decided that the return on equity as calculated based on the NEB

formula continued to be appropriate for the Canadian Mainline which results in an

approved rate of return on common equity of 9.61 per cent for 2001 and 9.53 per

cent for 2002.  The results for the year

ended December 31, 2002 include after-tax net income of $36 million or $0.08

per share representing the impact of the Fair Return decision for 2001 ($16

million) and 2002 ($20 million).




 




2. Accounting Changes




 




Price risk management




 




Effective September 30, 2002, the company

adopted accrual accounting for energy trading contracts in its continuing

operations, changing from its previous policy of mark-to-market




 




 




 













 




accounting for these

contracts.  This accounting change has

been applied retroactively with restatement of prior periods.  This change eliminates unrealized gains and

losses on energy trading contracts recognized under mark-to-market accounting.

The cumulative effect of this accounting change as at January 1, 2001 was a

decrease of $20 million in retained earnings. 

The impact of this change on net income was an increase/(decrease) for fourth

quarter 2002 of $5 million (2001 - $(1) million) and for the year ended

December 31, 2002 of $13 million (2001 - $11 million).  This change is reflected in the Power

segment.




 




Foreign currency translation




 




Effective January 1, 2002, TransCanada

adopted the amendment to the Canadian Institute of Chartered Accountants (CICA)

Handbook Section “Foreign Currency Translation”.  This amendment eliminates the deferral and amortization of

unrealized translation gains and losses on foreign currency denominated monetary

items that have a fixed or ascertainable life extending beyond the end of the

fiscal year following the current reporting period. This accounting change was

applied retroactively with restatement of prior periods. The cumulative effect

of this accounting change as at January 1, 2001 was an increase of $1 million

in retained earnings.  The impact of

this change on net income was an increase in fourth quarter 2002 of nil (2001 -

nil) and for the year ended December 31, 2002 of nil (2001 - $5 million).  This change is reflected in the Corporate

segment.




 




Stock-Based Compensation




 




In 2002, TransCanada adopted the new standard

of the CICA Handbook Section “Stock-Based Compensation and Other Stock-Based

Payments”. This section establishes standards for the recognition, measurement

and disclosure of stock-based compensation and other stock-based payments made

in exchange for goods and services.  It

applies to transactions in which an enterprise grants shares of common stock,

stock options, or other equity instruments, or incurs liabilities based on the

price of common stock or other equity instruments.  This standard allows companies to either expense, over the

vesting period, the fair value of the stock options granted or to disclose this

impact.




 




The company has chosen to expense stock

options and the impact of this accounting change, which has been recorded in

the fourth quarter of 2002, results in a $2 million charge to net income. This

charge is reflected in the Transmission and Power segments. The company used

the Black-Scholes model for this calculation.




 




 




 













 




On February 25, 2002, the

company issued 1,946,300 options to purchase common shares at $21.43 under the

company’s Key Employee Stock Incentive Plan. 

For these options, 25 per cent of the common shares subject to an option

may be purchased on the award date and 25 per cent on each of the three

following award date anniversaries.




 




After reflecting the accounting changes, the

following amounts in the Consolidated Balance Sheet, Consolidated Statement of

Income and Consolidated Statement of Cash Flows as at and for the year ended

December 31, 2001 have been restated as follows.




 




 




 













 




	

  (unaudited - millions of

  dollars)


  	

   


  	

  2001


  	

   


  
	

  Consolidated Balance Sheet


  	

   


  	

   


  	

   


  
	

  Energy

  trading assets


  	

   


  	

   


  	

   


  
	

  Current

  asset


  	

   


  	

  —


  	

   


  
	

  Long-term

  asset


  	

   


  	

  —


  	

   


  
	

  Other

  assets


  	

   


  	

  827


  	

   


  
	

  Future

  income tax asset


  	

   


  	

  —


  	

   


  
	

  Total

  assets


  	

   


  	

  19,954


  	

   


  
	

  Energy

  trading liabilities


  	

   


  	

   


  	

   


  
	

  Current

  liability


  	

   


  	

  —


  	

   


  
	

  Long-term

  liability


  	

   


  	

  —


  	

   


  
	

  Future

  income tax liability


  	

   


  	

  39


  	

   


  
	

  Total

  liabilities


  	

   


  	

  13,464


  	

   


  
	

  Retained

  earnings


  	

   


  	

  586


  	

   


  
	

   


  	

   


  	

   


  	

   


  
	

  Consolidated Income


  	

   


  	

   


  	

   


  
	

  Revenues


  	

   


  	

  5,275


  	

   


  
	

  Operating

  expenses


  	

   


  	

  2,330


  	

   


  
	

  Financial

  charges


  	

   


  	

  889


  	

   


  
	

  Income

  taxes - current and future


  	

   


  	

  480


  	

   


  
	

  Net

  income


  	

   


  	

  686


  	

   


  
	

   


  	

   


  	

   


  	

   


  
	

  Consolidated Cash Flows


  	

   


  	

   


  	

   


  
	

  Funds

  generated from continuing operations


  	

   


  	

  1,624


  	

   


  
	

  Net

  cash provided by investing activities


  	

   


  	

  123


  	

   


  





 




 




 













 




3. Segmented Information




 




	

   


  	

   


  	

  Transmission


  	

   


  	

  Power


  	

   


  	

  Corporate


  	

   


  	

  Total


  	

   


  
	

  Three months ended December 31


  (unaudited - millions of dollars)


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

  2002


  	

   


  	

  2001


  	

   


  	

  2002


  	

   


  	

  2001


  	

   


  	

  2002


  	

   


  	

  2001


  	

   


  	

  2002


  	

   


  	

  2001


  	

   


  
	

  Revenues


  	

   


  	

  1,007


  	

   


  	

  990


  	

   


  	

  331


  	

   


  	

  289


  	

   


  	

  —


  	

   


  	

  —


  	

   


  	

  1,338


  	

   


  	

  1,279


  	

   


  
	

  Operating

  expenses


  	

   


  	

  (319


  	

  )


  	

  (313


  	

  )


  	

  (264


  	

  )


  	

  (219


  	

  )


  	

  (1


  	

  )


  	

  (16


  	

  )


  	

  (584


  	

  )


  	

  (548


  	

  )


  
	

  Depreciation


  	

   


  	

  (197


  	

  )


  	

  (191


  	

  )


  	

  (20


  	

  )


  	

  (12


  	

  )


  	

  —


  	

   


  	

  (1


  	

  )


  	

  (217


  	

  )


  	

  (204


  	

  )


  
	

  Operating

  income/(loss)


  	

   


  	

  491


  	

   


  	

  486


  	

   


  	

  47


  	

   


  	

  58


  	

   


  	

  (1


  	

  )


  	

  (17


  	

  )


  	

  537


  	

   


  	

  527


  	

   


  
	

  Financial

  and preferred equity charges


  	

   


  	

  (205


  	

  )


  	

  (212


  	

  )


  	

  (4


  	

  )


  	

  (4


  	

  )


  	

  (21


  	

  )


  	

  (24


  	

  )


  	

  (230


  	

  )


  	

  (240


  	

  )


  
	

  Financial

  charges of joint ventures


  	

   


  	

  (23


  	

  )


  	

  (24


  	

  )


  	

  —


  	

   


  	

  (5


  	

  )


  	

  —


  	

   


  	

  —


  	

   


  	

  (23


  	

  )


  	

  (29


  	

  )


  
	

  Interest

  and other income


  	

   


  	

  12


  	

   


  	

  5


  	

   


  	

  2


  	

   


  	

  4


  	

   


  	

  10


  	

   


  	

  5


  	

   


  	

  24


  	

   


  	

  14


  	

   


  
	

  Income

  taxes


  	

   


  	

  (113


  	

  )


  	

  (102


  	

  )


  	

  (15


  	

  )


  	

  (18


  	

  )


  	

  —


  	

   


  	

  14


  	

   


  	

  (128


  	

  )


  	

  (106


  	

  )


  
	

  Continuing

  operations


  	

   


  	

  162


  	

   


  	

  153


  	

   


  	

  30


  	

   


  	

  35


  	

   


  	

  (12


  	

  )


  	

  (22


  	

  )


  	

  180


  	

   


  	

  166


  	

   


  
	

  Discontinued

  operations


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

  —


  	

   


  	

  20


  	

   


  
	

  Net Income Applicable to Common Shares


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

  180


  	

   


  	

  186


  	

   


  





 




 




	

   


  	

   


  	

  Transmission


  	

   


  	

  Power


  	

   


  	

  Corporate


  	

   


  	

  Total


  	

   


  
	

  Year ended December 31


  (unaudited - millions of dollars)


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  
	

   


  	

  2002


  	

   


  	

  2001


  	

   


  	

  2002


  	

   


  	

  2001


  	

   


  	

  2002


  	

   


  	

  2001


  	

   


  	

  2002


  	

   


  	

  2001


  	

   


  
	

  Revenues


  	

   


  	

  3,921


  	

   


  	

  3,880


  	

   


  	

  1,293


  	

   


  	

  1,395


  	

   


  	

  —


  	

   


  	

  —


  	

   


  	

  5,214


  	

   


  	

  5,275


  	

   


  
	

  Operating

  expenses


  	

   


  	

  (1,166


  	

  )


  	

  (1,226


  	

  )


  	

  (998


  	

  )


  	

  (1,073


  	

  )


  	

  (9


  	

  )


  	

  (31


  	

  )


  	

  (2,173


  	

  )


  	

  (2,330


  	

  )


  
	

  Depreciation


  	

   


  	

  (783


  	

  )


  	

  (753


  	

  )


  	

  (65


  	

  )


  	

  (37


  	

  )


  	

  —


  	

   


  	

  (3


  	

  )


  	

  (848


  	

  )


  	

  (793


  	

  )


  
	

  Operating

  income/(loss)


  	

   


  	

  1,972


  	

   


  	

  1,901


  	

   


  	

  230


  	

   


  	

  285


  	

   


  	

  (9


  	

  )


  	

  (34


  	

  )


  	

  2,193


  	

   


  	

  2,152


  	

   


  
	

  Financial

  and preferred equity charges


  	

   


  	

  (821


  	

  )


  	

  (856


  	

  )


  	

  (13


  	

  )


  	

  (15


  	

  )


  	

  (91


  	

  )


  	

  (85


  	

  )


  	

  (925


  	

  )


  	

  (956


  	

  )


  
	

  Financial

  charges of joint ventures


  	

   


  	

  (90


  	

  )


  	

  (98


  	

  )


  	

  —


  	

   


  	

  (9


  	

  )


  	

  —


  	

   


  	

  —


  	

   


  	

  (90


  	

  )


  	

  (107


  	

  )


  
	

  Interest

  and other income


  	

   


  	

  50


  	

   


  	

  30


  	

   


  	

  13


  	

   


  	

  13


  	

   


  	

  23


  	

   


  	

  34


  	

   


  	

  86


  	

   


  	

  77


  	

   


  
	

  Income

  taxes


  	

   


  	

  (458


  	

  )


  	

  (392


  	

  )


  	

  (84


  	

  )


  	

  (106


  	

  )


  	

  25


  	

   


  	

  18


  	

   


  	

  (517


  	

  )


  	

  (480


  	

  )


  
	

  Continuing

  operations


  	

   


  	

  653


  	

   


  	

  585


  	

   


  	

  146


  	

   


  	

  168


  	

   


  	

  (52


  	

  )


  	

  (67


  	

  )


  	

  747


  	

   


  	

  686


  	

   


  
	

  Discontinued

  operations


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

  —


  	

   


  	

  (67


  	

  )


  
	

  Net Income Applicable to Common Shares


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

   


  	

  747


  	

   


  	

  619


  	

   


  





 




 




	

  Total Assets


  December 31 (unaudited - millions of dollars)


  	

   


  	

  2002


  	

   


  	

  2001


  	

   


  
	

  Transmission


  	

   


  	

  16,979


  	

   


  	

  17,269


  	

   


  
	

  Power


  	

   


  	

  2,292


  	

   


  	

  1,880


  	

   


  
	

  Corporate


  	

   


  	

  457


  	

   


  	

  480


  	

   


  
	

  Continuing

  Operations


  	

   


  	

  19,728


  	

   


  	

  19,629


  	

   


  
	

  Discontinued

  Operations


  	

   


  	

  188


  	

   


  	

  325


  	

   


  
	

   


  	

   


  	

  19,916


  	

   


  	

  19,954


  	

   


  





 




 




 













 




4. Discontinued Operations




 




In July 2001, the Board of Directors approved

a plan to dispose of the company’s Gas Marketing business.  The Gas Marketing business provided supply,

transportation and asset management services, as well as structured financial

products and services.  In December

1999, the Board of Directors approved a plan (December Plan) to dispose of the

company’s International, Canadian Midstream and certain other businesses.  The company’s disposals under both plans

were substantially completed at December 31, 2001.




 




The company remains contingently liable

pursuant to obligations under certain energy trading contracts that relate to

the divested Gas Marketing business.  At

December 31, 2002, the provision for loss on discontinued operations, including

approximately $100 million of deferred after-tax gains and remaining

obligations related to the Gas Marketing business, was reviewed and was

concluded to be appropriate.




 




Revenues from discontinued operations for

fourth quarter 2002 were $6 million (fourth quarter 2001 - $703 million) and

for the twelve months ended December 31, 2002 were $36 million (2001 - $12,895

million).  The provision for loss on

discontinued operations at December 31, 2002 was $234 million (December 31,

2001 - $264 million).  This was

comprised of $129 million (December 31, 2001 - $129 million) relating to Gas

Marketing and $105 million (December 31, 2001 - $135 million) relating to the

December Plan.




 




Other

Financial Information on Discontinued Operations




 




The following amounts related

to discontinued operations are included in the consolidated balance sheet.




 




	

  December 31 (unaudited -

  millions of dollars)


  	

   


  	

  2002


  	

   


  	

  2001


  	

   


  
	

  Current

  assets


  	

   


  	

  79


  	

   


  	

  113


  	

   


  
	

  Non-current

  assets


  	

   


  	

  109


  	

   


  	

  212


  	

   


  
	

  Current

  liabilities


  	

   


  	

  (98


  	

  )


  	

  (116


  	

  )


  
	

  Non-current

  liabilities


  	

   


  	

  —


  	

   


  	

  (9


  	

  )


  
	

  Net Assets of Discontinued Operations


  	

   


  	

  90


  	

   


  	

  200


  	

   


  





 




5. Contingencies




 




The California Attorney General has filed a

complaint for civil penalties in California Superior Court under the California

Business and Professions Code. The complaint alleges that certain TransCanada

subsidiaries and affiliates engaged in sales or purchases of electricity in

California for which they failed to comply with the filing requirements of the

Federal Power Act and the U.S. Federal Energy Regulatory Commission (FERC)

orders.  TransCanada believes the

actions of its subsidiaries and




 




 




 













 




affiliates were in compliance with the

Federal Power Act and FERC requirements. TransCanada considers the complaint to

be without merit and is vigorously defending it.  The company has made no provision for any potential liability.




 




The Canadian Alliance of Pipeline Landowners’

Associations and two individual landowners have commenced an action under

Ontario’s Class Proceedings Act, 1992, against TransCanada and Enbridge Inc.

for damages alleged to arise from the creation of a control zone within 30

metres of the pipeline pursuant to section 112 of the NEB Act.  The company believes the claim is without

merit and will vigorously defend the action. 

The company has made no provision for any potential liability.  A liability, if any, would be dealt with

through the regulatory process.




 




The company and its subsidiaries are subject

to various other legal proceedings and actions arising in the normal course of

business.  While the final outcome of

such legal proceedings and actions cannot be predicted with certainty, it is

the opinion of management that their resolution will not have a material impact

on the company’s consolidated financial position or results of operations.




 




Supplementary

Information




 




As at December 31, 2002,

TransCanada had 479,502,342 issued and outstanding common shares.  In addition, there were 12,892,452

outstanding options to purchase common shares, of which 10,257,626 were

exercisable as at December 31, 2002.








 









TransCanada 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

Persad at (403) 920-7911. The investor fax line is (403) 920-2457. Media

Relations: Glenn Herchak/Kurt Kadatz at (403) 920-7877.




 








Visit TransCanada’s Internet site at: http://www.transcanada.com