Document:

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.comExhibit

4.210

 

TRANSCANADA

PIPELINES LIMITED

SIGNIFICANT

DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP (unaudited)

 

 

Net Income Reconciliation

 

	

  Year ended December 31

  (millions of dollars except per share amounts)

  	

   

  	

  2002

  	

   

  	

  2001

  	

   

  
	

  Net income from continuing operations as reported in accordance with

  Canadian GAAP

  	

   

  	

  805

  	

   

  	

  753

  	

   

  
	

  U.S. GAAP adjustments

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Preferred securities charges(1)

  	

   

  	

  (58

  	

  )

  	

  (77

  	

  )

  
	

  Tax impact of preferred securities charges

  	

   

  	

  22

  	

   

  	

  32

  	

   

  
	

  Unrealized gain/(loss) on derivatives(2)

  	

   

  	

  30

  	

   

  	

  (14

  	

  )

  
	

  Tax impact of gain/(loss) on derivatives

  	

   

  	

  (12

  	

  )

  	

  6

  	

   

  
	

  Unrealized losses on energy trading contracts(3)

  	

   

  	

  (21

  	

  )

  	

  (17

  	

  )

  
	

  Tax impact of unrealized losses on energy trading contracts

  	

   

  	

  8

  	

   

  	

  6

  	

   

  
	

  Income taxes from substantively enacted tax rates(4)

  	

   

  	

  —

  	

   

  	

  28

  	

   

  
	

  Income from continuing operations in accordance with U.S. GAAP

  	

   

  	

  774

  	

   

  	

  717

  	

   

  
	

  Net loss from discontinued operations in accordance with U.S. GAAP

  	

   

  	

  —

  	

   

  	

  (67

  	

  )

  
	

  Income before cumulative effect of the application of SFAS No. 133 in

  accordance with U.S. GAAP

  	

   

  	

  774

  	

   

  	

  650

  	

   

  
	

  Cumulative effect of the application of SFAS No. 133, net of tax(2)

  	

   

  	

  —

  	

   

  	

  (2

  	

  )

  
	

  Net income in accordance with U.S. GAAP

  	

   

  	

  774

  	

   

  	

  648

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Net income/(loss) per share in accordance with U.S. GAAP

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Continuing operations

  	

   

  	

  $

  	

  1.57

  	

   

  	

  $

  	

  1.46

  	

   

  
	

  Discontinued operations

  	

   

  	

  —

  	

   

  	

  (0.14

  	

  )

  
	

  Basic

  	

   

  	

  $

  	

  1.57

  	

   

  	

  $

  	

  1.32

  	

   

  
	

  Diluted

  	

   

  	

  $

  	

  1.56

  	

   

  	

  $

  	

  1.32

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Net income per share in accordance with Canadian GAAP

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Basic

  	

   

  	

  $

  	

  1.56

  	

   

  	

  $

  	

  1.30

  	

   

  
	

  Diluted

  	

   

  	

  $

  	

  1.55

  	

   

  	

  $

  	

  1.30

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Dividends per common share

  	

   

  	

  $

  	

  1.00

  	

   

  	

  $

  	

  0.90

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Common Shares Outstanding (millions)

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Average for the period — Basic

  	

   

  	

  478.3

  	

   

  	

  475.8

  	

   

  
	

  Average for the period — Diluted

  	

   

  	

  480.7

  	

   

  	

  477.6

  	

   

  

(1)         Under U.S.

GAAP, the financial charges related to preferred securities are recognized as

an expense, rather than dividends.

(2)         In 2001, TransCanada

PipeLines Limited (TransCanada or the Company) adopted the provisions of

Statement of Financial Accounting Standards (SFAS) No. 133 “Accounting for

Derivatives and Hedging Activities”. SFAS No. 133 requires that all derivatives

be 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 derivative 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.

(3)         Under U.S. GAAP, energy

trading contracts are measured at fair value determined as at the balance sheet

date. In 2002, TransCanada adopted the provisions of EITF 02-3, “Accounting for

Contracts Involved in Energy Trading and Risk Management Activities” whereby

the company is presenting all mark-to-market gains and losses and all revenues

and expenses related to energy trading contracts subject to mark-to-market

accounting on a net basis.  This

accounting change has been applied retroactively with reclassification of prior

periods.

 

 

(4)         Under U.S. GAAP, only

enacted rates can be used in measuring deferred tax assets and liabilities; use

of substantively enacted rates is not permitted.  The February 2000 and October 2000 Federal budgets would not be

considered enacted until the proposals were completely enacted into law in June

2001 and, accordingly, the related tax recoveries were recognized in 2001.

 

Condensed Statement of Consolidated Income in

Accordance with U.S. GAAP(7)

 

	

  Year ended December 31

  (millions of dollars)

  	

   

  	

  2002

  	

   

  	

  2001

  	

   

  
	

  Revenues(3) (7)

  	

   

  	

  4,284

  	

   

  	

  4,165

  	

   

  
	

  Operating expenses(3) (7)

  	

   

  	

  1,692

  	

   

  	

  1,656

  	

   

  
	

  Depreciation

  	

   

  	

  729

  	

   

  	

  675

  	

   

  
	

   

  	

   

  	

  2,421

  	

   

  	

  2,331

  	

   

  
	

  Operating income

  	

   

  	

  1,863

  	

   

  	

  1,834

  	

   

  
	

  Other (income)/expenses

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Equity income

  	

   

  	

  (260

  	

  )

  	

  (221

  	

  )

  
	

  Other expenses(5)

  	

   

  	

  850

  	

   

  	

  931

  	

   

  
	

  Income taxes

  	

   

  	

  499

  	

   

  	

  407

  	

   

  
	

   

  	

   

  	

  1,089

  	

   

  	

  1,117

  	

   

  
	

  Income from continuing operations in accordance with U.S. GAAP

  	

   

  	

  774

  	

   

  	

  717

  	

   

  
	

  Net (loss)/income from discontinued operations in accordance with

  U.S.  GAAP

  	

   

  	

  —

  	

   

  	

  (67

  	

  )

  
	

  Income before cumulative effect of the application of SFAS No. 133 in  accordance

  with U.S. GAAP

  	

   

  	

  774

  	

   

  	

  650

  	

   

  
	

  Cumulative effect of the application of SFAS No. 133, net of tax(2)

  	

   

  	

  —

  	

   

  	

  (2

  	

  )

  
	

  Net income in accordance with U.S. GAAP

  	

   

  	

  774

  	

   

  	

  648

  	

   

  

 

Comprehensive Income in Accordance with U.S. GAAP

 

	

  Year ended December 31

  (millions of dollars)

  	

   

  	

  2002

  	

   

  	

  2001

  	

   

  
	

  Net income in accordance with U.S. GAAP

  	

   

  	

  774

  	

   

  	

  648

  	

   

  
	

  Adjustments affecting comprehensive income under U.S. GAAP

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Foreign currency translation adjustment

  	

   

  	

  1

  	

   

  	

  —

  	

   

  
	

  Additional minimum liability for employee future benefits (SFAS No.

  87)(6)

  	

   

  	

  (62

  	

  )

  	

  (86

  	

  )

  
	

  Tax impact of additional minimum liability for employee future

  benefits

  	

   

  	

  22

  	

   

  	

  30

  	

   

  
	

  Unrealized loss on derivatives(2)

  	

   

  	

  (3

  	

  )

  	

  (7

  	

  )

  
	

  Tax impact of loss on derivatives

  	

   

  	

  (1

  	

  )

  	

  2

  	

   

  
	

  Comprehensive income before cumulative effect of the application of

  SFAS  No. 133 in accordance with U.S. GAAP

  	

   

  	

  731

  	

   

  	

  587

  	

   

  
	

  Cumulative effect of the application of SFAS No. 133, net of tax(2)

  	

   

  	

  —

  	

   

  	

  (4

  	

  )

  
	

  Comprehensive income in accordance with U.S. GAAP

  	

   

  	

  731

  	

   

  	

  583

  	

   

  

 

 

Condensed Balance Sheet in Accordance with U.S. GAAP(7)

 

	

  December 31 (millions of

  dollars)

  	

   

  	

  2002

  	

   

  	

  2001

  	

   

  
	

  Current assets

  	

   

  	

  1,074

  	

   

  	

  1,162

  	

   

  
	

  Long-term energy trading assets(3)

  	

   

  	

  218

  	

   

  	

  255

  	

   

  
	

  Long-term investments

  	

   

  	

  1,629

  	

   

  	

  1,570

  	

   

  
	

  Plant, property and equipment

  	

   

  	

  14,992

  	

   

  	

  15,379

  	

   

  
	

  Regulatory asset(8)

  	

   

  	

  2,578

  	

   

  	

  2,613

  	

   

  
	

  Other assets

  	

   

  	

  893

  	

   

  	

  473

  	

   

  
	

   

  	

   

  	

  21,384

  	

   

  	

  21,452

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Current liabilities(9)

  	

   

  	

  1,918

  	

   

  	

  1,844

  	

   

  
	

  Provision for loss on discontinued operations

  	

   

  	

  234

  	

   

  	

  264

  	

   

  
	

  Long-term energy trading liabilities(3)

  	

   

  	

  41

  	

   

  	

  112

  	

   

  
	

  Deferred amounts

  	

   

  	

  593

  	

   

  	

  503

  	

   

  
	

  Long-term debt

  	

   

  	

  8,963

  	

   

  	

  9,512

  	

   

  
	

  Deferred income taxes(8)

  	

   

  	

  2,692

  	

   

  	

  2,556

  	

   

  
	

  Preferred securities(10)

  	

   

  	

  694

  	

   

  	

  694

  	

   

  
	

  Trust originated preferred securities

  	

   

  	

  218

  	

   

  	

  218

  	

   

  
	

  Shareholders’ equity

  	

   

  	

  6,031

  	

   

  	

  5,749

  	

   

  
	

   

  	

   

  	

  21,384

  	

   

  	

  21,452

  	

   

  

 

 

Statement of Other Comprehensive Income in Accordance

with U.S. GAAP

 

	

  December 31 (millions of

  dollars)

  	

   

  	

  Cumulative

  Translation Account

  	

   

  	

  Minimum

  Pension Liability

  (FAS 87)

  	

   

  	

  Cash Flow

  Hedges

  (FAS 133)

  	

   

  	

  Total

  	

   

  
	

  Balance at January 1, 2001

  	

   

  	

  13

  	

   

  	

  —

  	

   

  	

  —

  	

   

  	

  13

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Additional minimum liability for employee future benefits, net of tax(6)

  	

   

  	

  —

  	

   

  	

  (56

  	

  )

  	

  —

  	

   

  	

  (56

  	

  )

  
	

  Unrealized loss on derivatives, net of tax(2)

  	

   

  	

  —

  	

   

  	

  —

  	

   

  	

  (5

  	

  )

  	

  (5

  	

  )

  
	

  Cumulative effect of adoption of FAS 133, net of tax(2)

  	

   

  	

  —

  	

   

  	

  —

  	

   

  	

  (4

  	

  )

  	

  (4

  	

  )

  
	

  Balance at December 31, 2001

  	

   

  	

  13

  	

   

  	

  (56

  	

  )

  	

  (9

  	

  )

  	

  (52

  	

  )

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Additional minimum liability for employee future  benefits, net of tax(6)

  	

   

  	

  —

  	

   

  	

  (40

  	

  )

  	

  —

  	

   

  	

  (40

  	

  )

  
	

  Unrealized loss on derivatives, net of tax(2)

  	

   

  	

  —

  	

   

  	

  —

  	

   

  	

  (4

  	

  )

  	

  (4

  	

  )

  
	

  Foreign currency translation adjustment

  	

   

  	

  1

  	

   

  	

  —

  	

   

  	

  —

  	

   

  	

  1

  	

   

  
	

  Balance at December 31, 2002

  	

   

  	

  14

  	

   

  	

  (96

  	

  )

  	

  (13

  	

  )

  	

  (95

  	

  )

  

(5)                Other expenses

included an allowance for funds used during construction of $4 million for the

year ended December 31, 2002 (2001 - $5 million).

(6)                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.

(7)                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.

(8)                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.

 

 

(9)                Current liabilities at

December 31, 2002 include dividends payable of $125 million (2001 - $114

million) and current taxes payable of 

$150 million (2001 - $149 million).

(10)          Under U.S. GAAP, the preferred securities are

classified as a liability.  The fair

value of the preferred securities at December 31, 2002 was $743 million (2001 -

$740 million).  The Company made

preferred securities charges payments of $58 million for the year ended

December 31, 2002 (2001 - $77 million).

 

Stock-Based Compensation

 

Under the transition rules

provided by SFAS No. 148 “Accounting for Stock-Based Compensation - Transition

and Disclosure - an amendment of FASB Statement No. 123”, the Company has

expensed stock options granted in 2002. 

The use of the fair value method of SFAS No. 123 “Accounting for

Stock-Based Compensation” for previously issued options would have resulted in

net income under U.S. GAAP of $770 million in 2002 (2001 - $643 million) and

net income per share (basic) of $1.56 in 2002 (2001 - $1.30 per share).

Other

 

In June 2001, the Financial Accounting Standards Board (FASB) issued

SFAS No. 143 “Accounting for Asset Retirement Obligations”, which addresses

financial accounting and reporting for obligations associated with asset

retirement costs.  SFAS No. 143 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.  The Company is required and plans to adopt

the provisions of SFAS No. 143 for the quarter ending March 31, 2003.  The Company, at this time, has not completed

the estimation process to determine the impact of adopting this standard.

 

Summarized Financial Information of Long-Term

Investments

 

	

  Year ended December 31

  (millions of dollars)

  	

   

  	

  2002

  	

   

  	

  2001

  	

   

  
	

  Income

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Revenues

  	

   

  	

  798

  	

   

  	

  695

  	

   

  
	

  Operating expenses

  	

   

  	

  (273

  	

  )

  	

  (191

  	

  )

  
	

  Depreciation

  	

   

  	

  (146

  	

  )

  	

  (143

  	

  )

  
	

  Financial charges and other

  	

   

  	

  (112

  	

  )

  	

  (136

  	

  )

  
	

  Proportionate share of income before income taxes of long-term

  investments

  	

   

  	

  267

  	

   

  	

  225

  	

   

  
	

   

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  December 31 (millions of

  dollars)

  	

   

  	

  2002

  	

   

  	

  2001

  	

   

  
	

  Balance sheet

  	

   

  	

   

  	

   

  	

   

  	

   

  
	

  Current assets

  	

   

  	

  246

  	

   

  	

  223

  	

   

  
	

  Plant, property and equipment

  	

   

  	

  3,197

  	

   

  	

  3,171

  	

   

  
	

  Other assets and deferred amounts (net)

  	

   

  	

  112

  	

   

  	

  139

  	

   

  
	

  Current liabilities

  	

   

  	

  (216

  	

  )

  	

  (231

  	

  )

  
	

  Non-recourse debt

  	

   

  	

  (1,646

  	

  )

  	

  (1,669

  	

  )

  
	

  Deferred income taxes

  	

   

  	

  (64

  	

  )

  	

  (63

  	

  )

  
	

  Proportionate share of net assets of long-term investments

  	

   

  	

  1,629

  	

   

  	

  1,570

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00046-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00046-of-00352.parquet"}]]