Exhibit 4.218


 


Consolidated Income


 


	
  Three
  months ended March 31 (unaudited)

  (millions of dollars except per share amounts)

  	
   

  	
  2003

  	
   

  	
  2002

  	
   

  
	
  Revenues

  	
   

  	
  1,336

  	
   

  	
  1,246

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Operating
  Expenses

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cost of sales

  	
   

  	
  180

  	
   

  	
  133

  	
   

  
	
  Other costs and expenses

  	
   

  	
  427

  	
   

  	
  354

  	
   

  
	
  Depreciation

  	
   

  	
  215

  	
   

  	
  207

  	
   

  
	
   

  	
   

  	
  822

  	
   

  	
  694

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Operating
  Income

  	
   

  	
  514

  	
   

  	
  552

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Other
  Expenses/(Income)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Financial charges

  	
   

  	
  204

  	
   

  	
  221

  	
   

  
	
  Financial charges of joint
  ventures

  	
   

  	
  22

  	
   

  	
  23

  	
   

  
	
  Equity income

  	
   

  	
  (58

  	
  )

  	
  (10

  	
  )

  
	
  Interest and other income

  	
   

  	
  (13

  	
  )

  	
  (11

  	
  )

  
	
   

  	
   

  	
  155

  	
   

  	
  223

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Income
  before Income Taxes

  	
   

  	
  359

  	
   

  	
  329

  	
   

  
	
  Income
  Taxes - Current and Future

  	
   

  	
  136

  	
   

  	
  128

  	
   

  
	
  Net
  Income

  	
   

  	
  223

  	
   

  	
  201

  	
   

  
	
  Preferred
  Securities Charges

  	
   

  	
  9

  	
   

  	
  9

  	
   

  
	
  Preferred
  Share Dividends

  	
   

  	
  6

  	
   

  	
  5

  	
   

  
	
  Net
  Income Applicable to Common Shares

  	
   

  	
  208

  	
   

  	
  187

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net
  Income Per Share - Basic and Diluted

  	
   

  	
  $

  	
  0.43

  	
   

  	
  $

  	
  0.39

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Average
  Shares Outstanding - Basic (millions)

  	
   

  	
  480.1

  	
   

  	
  477.0

  	
   

  
	
  Average
  Shares Outstanding - Diluted (millions)

  	
   

  	
  481.9

  	
   

  	
  479.1

  	
   

  
								



 


See accompanying Notes to the Consolidated
Financial Statements.


 

















 


Consolidated Cash Flows


 


	
  Three
  months ended March 31 (unaudited)

  (millions of dollars)

  	
   

  	
  2003

  	
   

  	
  2002

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash
  Generated From Operations

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net income

  	
   

  	
  223

  	
   

  	
  201

  	
   

  
	
  Depreciation

  	
   

  	
  215

  	
   

  	
  207

  	
   

  
	
  Future income taxes

  	
   

  	
  74

  	
   

  	
  53

  	
   

  
	
  Equity income in excess of
  distributions received

  	
   

  	
  (51

  	
  )

  	
  (4

  	
  )

  
	
  Other

  	
   

  	
  (4

  	
  )

  	
  (2

  	
  )

  
	
  Funds generated from
  operations

  	
   

  	
  457

  	
   

  	
  455

  	
   

  
	
  Increase in operating
  working capital

  	
   

  	
  (8

  	
  )

  	
  (54

  	
  )

  
	
  Net cash provided by
  continuing operations

  	
   

  	
  449

  	
   

  	
  401

  	
   

  
	
  Net cash provided by
  discontinued operations

  	
   

  	
  4

  	
   

  	
  58

  	
   

  
	
   

  	
   

  	
  453

  	
   

  	
  459

  	
   

  
	
  Investing
  Activities

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Capital expenditures

  	
   

  	
  (76

  	
  )

  	
  (117

  	
  )

  
	
  Acquisitions, net of cash
  acquired

  	
   

  	
  (409

  	
  )

  	
  —

  	
   

  
	
  Disposition of assets

  	
   

  	
  5

  	
   

  	
  —

  	
   

  
	
  Deferred amounts and other

  	
   

  	
  (23

  	
  )

  	
  17

  	
   

  
	
  Net cash used in investing
  activities

  	
   

  	
  (503

  	
  )

  	
  (100

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Financing
  Activities

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dividends and preferred
  securities charges

  	
   

  	
  (139

  	
  )

  	
  (127

  	
  )

  
	
  Notes payable
  issued/(repaid), net

  	
   

  	
  209

  	
   

  	
  (171

  	
  )

  
	
  Reduction of long-term
  debt

  	
   

  	
  (9

  	
  )

  	
  (92

  	
  )

  
	
  Non-recourse debt of joint
  ventures issued

  	
   

  	
  17

  	
   

  	
  1

  	
   

  
	
  Reduction of non-recourse
  debt of joint ventures

  	
   

  	
  (16

  	
  )

  	
  (13

  	
  )

  
	
  Common shares issued

  	
   

  	
  16

  	
   

  	
  15

  	
   

  
	
  Net cash provided by/(used
  in) financing activities

  	
   

  	
  78

  	
   

  	
  (387

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

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

  	
   

  	
  28

  	
   

  	
  (28

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash and
  Short-Term Investments

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Beginning of period

  	
   

  	
  212

  	
   

  	
  299

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash and
  Short-Term Investments

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  End of period

  	
   

  	
  240

  	
   

  	
  271

  	
   

  



 


See accompanying Notes to the Consolidated
Financial Statements.


 

















 


Consolidated
Balance Sheet


 


	
  (millions of dollars)

  	
   

  	
  March 31,
  2003

  (unaudited)

  	
   

  	
  December 31,

  2002

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ASSETS

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Current
  Assets

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash and short-term
  investments

  	
   

  	
  240

  	
   

  	
  212

  	
   

  
	
  Accounts receivable

  	
   

  	
  724

  	
   

  	
  691

  	
   

  
	
  Inventories

  	
   

  	
  167

  	
   

  	
  178

  	
   

  
	
  Other

  	
   

  	
  84

  	
   

  	
  102

  	
   

  
	
   

  	
   

  	
  1,215

  	
   

  	
  1,183

  	
   

  
	
  Long-Term
  Investments

  	
   

  	
  725

  	
   

  	
  291

  	
   

  
	
  Plant,
  Property and Equipment

  	
   

  	
  17,220

  	
   

  	
  17,496

  	
   

  
	
  Other
  Assets

  	
   

  	
  952

  	
   

  	
  946

  	
   

  
	
   

  	
   

  	
  20,112

  	
   

  	
  19,916

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LIABILITIES
  AND SHAREHOLDERS’ EQUITY

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Current
  Liabilities

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Notes payable

  	
   

  	
  506

  	
   

  	
  297

  	
   

  
	
  Accounts payable

  	
   

  	
  891

  	
   

  	
  902

  	
   

  
	
  Accrued interest

  	
   

  	
  245

  	
   

  	
  227

  	
   

  
	
  Current portion of
  long-term debt

  	
   

  	
  616

  	
   

  	
  517

  	
   

  
	
  Current portion of
  non-recourse debt of joint ventures

  	
   

  	
  70

  	
   

  	
  75

  	
   

  
	
  Provision for loss on
  discontinued operations

  	
   

  	
  232

  	
   

  	
  234

  	
   

  
	
   

  	
   

  	
  2,560

  	
   

  	
  2,252

  	
   

  
	
  Deferred
  Amounts

  	
   

  	
  341

  	
   

  	
  353

  	
   

  
	
  Long-Term
  Debt

  	
   

  	
  8,616

  	
   

  	
  8,815

  	
   

  
	
  Future
  Income Taxes

  	
   

  	
  287

  	
   

  	
  226

  	
   

  
	
  Non-Recourse
  Debt of Joint Ventures

  	
   

  	
  1,179

  	
   

  	
  1,222

  	
   

  
	
  Junior
  Subordinated Debentures

  	
   

  	
  239

  	
   

  	
  238

  	
   

  
	
   

  	
   

  	
  13,222

  	
   

  	
  13,106

  	
   

  
	
  Shareholders’
  Equity

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Preferred securities

  	
   

  	
  673

  	
   

  	
  674

  	
   

  
	
  Preferred shares

  	
   

  	
  389

  	
   

  	
  389

  	
   

  
	
  Common shares

  	
   

  	
  4,630

  	
   

  	
  4,614

  	
   

  
	
  Contributed surplus

  	
   

  	
  266

  	
   

  	
  265

  	
   

  
	
  Retained earnings

  	
   

  	
  933

  	
   

  	
  854

  	
   

  
	
  Foreign exchange
  adjustment

  	
   

  	
  (1

  	
  )

  	
  14

  	
   

  
	
   

  	
   

  	
  6,890

  	
   

  	
  6,810

  	
   

  
	
   

  	
   

  	
  20,112

  	
   

  	
  19,916

  	
   

  



 


See accompanying Notes to the Consolidated
Financial Statements.


 

















 


Consolidated
Retained Earnings


 


	
  Three
  months ended March 31 (unaudited)

  (millions of dollars)

  	
   

  	
  2003

  	
   

  	
  2002

  	
   

  
	
  Balance at beginning of
  period

  	
   

  	
  854

  	
   

  	
  586

  	
   

  
	
  Net income

  	
   

  	
  223

  	
   

  	
  201

  	
   

  
	
  Preferred securities
  charges

  	
   

  	
  (9

  	
  )

  	
  (9

  	
  )

  
	
  Preferred share dividends

  	
   

  	
  (6

  	
  )

  	
  (5

  	
  )

  
	
  Common share dividends

  	
   

  	
  (129

  	
  )

  	
  (119

  	
  )

  
	
   

  	
   

  	
  933

  	
   

  	
  654

  	
   

  



 


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,
2002 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 2002 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.              Segmented
Information


 


	
  Three months ended March 31

  (unaudited - millions of dollars)

  	
   

  	
  Transmission

  	
   

  	
  Power

  	
   

  	
  Corporate

  	
   

  	
  Total

  	
   

  
	
   

  	
  2003

  	
   

  	
  2002

  	
   

  	
  2003

  	
   

  	
  2002

  	
   

  	
  2003

  	
   

  	
  2002

  	
   

  	
  2003

  	
   

  	
  2002

  	
   

  
	
  Revenues

  	
   

  	
  960

  	
   

  	
  941

  	
   

  	
  376

  	
   

  	
  305

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  1,336

  	
   

  	
  1,246

  	
   

  
	
  Cost of sales

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (180

  	
  )

  	
  (133

  	
  )

  	
  —

  	
   

  	
  —

  	
   

  	
  (180

  	
  )

  	
  (133

  	
  )

  
	
  Other costs and expenses

  	
   

  	
  (304

  	
  )

  	
  (260

  	
  )

  	
  (121

  	
  )

  	
  (92

  	
  )

  	
  (2

  	
  )

  	
  (2

  	
  )

  	
  (427

  	
  )

  	
  (354

  	
  )

  
	
  Depreciation

  	
   

  	
  (194

  	
  )

  	
  (192

  	
  )

  	
  (21

  	
  )

  	
  (15

  	
  )

  	
  —

  	
   

  	
  —

  	
   

  	
  (215

  	
  )

  	
  (207

  	
  )

  
	
  Operating income/(loss)

  	
   

  	
  462

  	
   

  	
  489

  	
   

  	
  54

  	
   

  	
  65

  	
   

  	
  (2

  	
  )

  	
  (2

  	
  )

  	
  514

  	
   

  	
  552

  	
   

  
	
  Financial and preferred equity charges

  	
   

  	
  (196

  	
  )

  	
  (206

  	
  )

  	
  (2

  	
  )

  	
  (3

  	
  )

  	
  (21

  	
  )

  	
  (26

  	
  )

  	
  (219

  	
  )

  	
  (235

  	
  )

  
	
  Financial charges of joint ventures

  	
   

  	
  (22

  	
  )

  	
  (23

  	
  )

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (22

  	
  )

  	
  (23

  	
  )

  
	
  Equity income

  	
   

  	
  20

  	
   

  	
  10

  	
   

  	
  38

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  58

  	
   

  	
  10

  	
   

  
	
  Interest and other income

  	
   

  	
  5

  	
   

  	
  6

  	
   

  	
  4

  	
   

  	
  3

  	
   

  	
  4

  	
   

  	
  2

  	
   

  	
  13

  	
   

  	
  11

  	
   

  
	
  Income taxes

  	
   

  	
  (111

  	
  )

  	
  (113

  	
  )

  	
  (31

  	
  )

  	
  (24

  	
  )

  	
  6

  	
   

  	
  9

  	
   

  	
  (136

  	
  )

  	
  (128

  	
  )

  
	
  Net Income Applicable to
  Common Shares

  	
   

  	
  158

  	
   

  	
  163

  	
   

  	
  63

  	
   

  	
  41

  	
   

  	
  (13

  	
  )

  	
  (17

  	
  )

  	
  208

  	
   

  	
  187

  	
   

  



 

















 


	
  Total Assets

  (millions
  of dollars)

  	
   

  	
  March 31,
  2003

  (unaudited)

  	
   

  	
  December 31,

  2002

  	
   

  
	
  Transmission

  	
   

  	
  16,651

  	
   

  	
  16,979

  	
   

  
	
  Power

  	
   

  	
  2,718

  	
   

  	
  2,292

  	
   

  
	
  Corporate

  	
   

  	
  568

  	
   

  	
  457

  	
   

  
	
  Continuing Operations

  	
   

  	
  19,937

  	
   

  	
  19,728

  	
   

  
	
  Discontinued Operations

  	
   

  	
  175

  	
   

  	
  188

  	
   

  
	
   

  	
   

  	
  20,112

  	
   

  	
  19,916

  	
   

  



 


3.              Discontinued
Operations


 


In July 2001, the Board of
Directors approved a plan to dispose of the company’s Gas Marketing
business.  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 March 31, 2003, 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.


 


Net income from discontinued
operations for first quarter 2003 and first quarter 2002 was nil. The provision
for loss on discontinued operations at March 31, 2003 was $232 million
(December 31, 2002 - $234 million). The net assets of discontinued operations
included in the consolidated balance sheet at March 31, 2003 were $76 million
(December 31, 2002 - $90 million).


 


4.              Contingencies


 


Actions have been brought on a
class action basis against certain of the company’s subsidiaries and affiliates
along with many other unrelated energy companies in both Washington and Oregon
claiming injunctive relief and/or unspecified damages under the applicable
unfair trading practices legislation of those states in connection with the
sale and purchase of electricity in their respective jurisdictions.  TransCanada considers the complaint to be
without merit and will be vigorously defending it.


 


The action brought against
TransCanada and similar actions brought against other unrelated energy
companies by the California Attorney General, as disclosed in the December 31,
2002 audited financial statements, was dismissed by the U.S. Federal District
Court in March 2003.


 

















 


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.


 


5.              Acquisition


 


On February 14, 2003,
TransCanada completed the acquisition of a 31.6 per cent interest in Bruce
Power L.P. for $376 million plus closing adjustments.  TransCanada also loaned a one-third share ($75 million) of a $225
million accelerated deferred rent payment to Ontario Power Generation. Bruce
Power L.P. is a tenant under a lease on the Bruce nuclear power facility in
Ontario.  The lease expires in 2018 with
an option to extend the lease by up to 25 years.


 


Upon acquisition of Bruce Power
L.P., the company, Cameco and BPC Generation Infrastructure Trust guaranteed on
a several, pro-rata basis certain contingent financial obligations of Bruce
Power L.P. related to operator licences, the lease agreement, power sales
agreements and contractor services.  TransCanada’s
share of the net exposure under these guarantees at the time of closing was
estimated to be approximately $260 million. 
The terms of the guarantees range from 2003 to 2018.  The current carrying amount of the liability
related to these guarantees is nil and the fair value is approximately $4
million.


 


Supplementary
Information


 


As at March 31, 2003,
TransCanada had 480,532,023 issued and outstanding common shares.  In addition, there were 13,170,942
outstanding options to purchase common shares, of which 10,370,941 were
exercisable as at March 31, 2003.


 


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/Hejdi Feick at (403) 920-7877.


 


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