Document:

Exhibit
4.219

 

TRANSCANADA
PIPELINES LIMITED

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

 

Net
Income Reconciliation

 

	
   

  	
   

  	
  Three months ended March 31 

  	
   

  
	
   

  	
   

  	
  2003

  	
   

  	
  2002

  	
   

  
	
   

  	
   

  	
  (millions of dollars except per share amounts)

  	
   

  
	
  Net income in accordance
  with Canadian GAAP

  	
   

  	
  223

  	
   

  	
  201

  	
   

  
	
  U.S. GAAP
  adjustments

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Preferred
  securities charges(1)

  	
   

  	
  (14

  	
  )

  	
  (14

  	
  )

  
	
  Tax impact of
  preferred securities charges

  	
   

  	
  5

  	
   

  	
  5

  	
   

  
	
  Unrealized loss
  on foreign exchange and interest rate derivatives(2)

  	
   

  	
  (6

  	
  )

  	
  (6

  	
  )

  
	
  Tax impact of
  loss on foreign exchange and interest rate derivatives

  	
   

  	
  2

  	
   

  	
  2

  	
   

  
	
  Unrealized loss
  on energy trading contracts(3)

  	
   

  	
  (11

  	
  )

  	
  (1

  	
  )

  
	
  Tax impact of
  unrealized loss on energy trading contracts

  	
   

  	
  4

  	
   

  	
  —

  	
   

  
	
  Equity income(4)

  	
   

  	
  (3

  	
  )

  	
  —

  	
   

  
	
  Tax impact of
  equity income

  	
   

  	
  1

  	
   

  	
  —

  	
   

  
	
  Income before
  cumulative effect of the application of EITF 02-3 in accordance with U.S.
  GAAP

  	
   

  	
  201

  	
   

  	
  187

  	
   

  
	
  Cumulative
  effect of the application of EITF 02-3, net of tax(3)

  	
   

  	
  (13

  	
  )

  	
  —

  	
   

  
	
  Net income in
  accordance with U.S. GAAP

  	
   

  	
  188

  	
   

  	
  187

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Basic and
  diluted net income per share in accordance with U.S. GAAP

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Income before
  cumulative effect of the application of EITF 02-3 in accordance with U.S.
  GAAP

  	
   

  	
  $

  	
  0.41

  	
   

  	
  $

  	
  0.38

  	
   

  
	
  Cumulative
  effect of the application of EITF 02-3, net of tax(3)

  	
   

  	
  (0.03

  	
  )

  	
  —

  	
   

  
	
   

  	
   

  	
  $

  	
  0.38

  	
   

  	
  $

  	
  0.38

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Basic and
  diluted net income per share in accordance with Canadian GAAP

  	
   

  	
  $

  	
  0.43

  	
   

  	
  $

  	
  0.39

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dividends per
  common share

  	
   

  	
  $

  	
  0.27

  	
   

  	
  $

  	
  0.25

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common Shares Outstanding (millions)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Average for the
  period — Basic

  	
   

  	
  480.1

  	
   

  	
  477.0

  	
   

  
	
  Average for the
  period — Diluted

  	
   

  	
  481.9

  	
   

  	
  479.1

  	
   

  

(1)          Under U.S. GAAP, the financial charges related to preferred
securities are recognized as an expense, rather than dividends.

 

(2)          Under the
provisions of Statement of Financial Accounting Standards (SFAS) No. 133
“Accounting for Derivatives and Hedging Activities”, all derivatives are
recognized as assets and liabilities on the balance sheet and measured at fair
value.  For derivatives designated as
fair value hedges, changes in the fair value are recognized in earnings
together with an equal or lesser amount of changes in the fair value of the
hedged item attributable to the hedged risk. 
For derivatives designated as cash flow hedges, changes in the fair
value of the derivative that are effective in offsetting the hedged risk are
recognized in other comprehensive income until the hedged item is recognized in
earnings. Any 

 

 

1

 

 

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 PipeLines Limited (TransCanada or the Company) adopted the transitional
provisions of FASB Emerging Issues Task Force (EITF) 02-3, “Accounting for
Contracts Involved in Energy Trading and Risk Management Activities” whereby
the Company is netting all revenues and expenses related to derivative energy
trading contracts.  This accounting
change was applied retroactively with reclassification of prior periods.  Effective January 1, 2003, the Company fully
adopted EITF 02-3.  Certain of the
energy trading derivatives are accounted for as hedges under Canadian GAAP but
not under U.S. GAAP.  These derivatives
as well as other derivatives held for trading purposes are measured at fair
value and accounted for under the provisions of SFAS No. 133.  The Company’s energy trading contracts that
are not derivatives are not subject to mark-to-market accounting.  This accounting change was effected through
a cumulative adjustment in the current period income with no restatement of
prior periods.

 

(4)          Under Canadian
GAAP, pre-operating costs incurred during the commissioning phase of a new
project are deferred until commercial production levels are achieved.  After such time, those costs are amortized
over the estimated life of the project. 
Under U.S. GAAP, such costs are expensed as incurred.  Certain start-up costs related to the Company’s
equity investment in Bruce Power L.P. are required to be expensed under U.S. GAAP.

 

Condensed Statement of
Consolidated Income in Accordance with U.S. GAAP (6)

 

	
   

  	
   

  	
  Three months ended March 31

  	
   

  
	
   

  	
   

  	
  2003

  	
   

  	
  2002

  	
   

  
	
   

  	
   

  	
  (millions of dollars)

  	
   

  
	
  Revenues(3)

  	
   

  	
  1,177

  	
   

  	
  1,116

  	
   

  
	
  Cost of sales(3)

  	
   

  	
  151

  	
   

  	
  123

  	
   

  
	
  Other costs and
  expenses

  	
   

  	
  422

  	
   

  	
  352

  	
   

  
	
  Depreciation

  	
   

  	
  185

  	
   

  	
  181

  	
   

  
	
   

  	
   

  	
  758

  	
   

  	
  656

  	
   

  
	
  Operating income

  	
   

  	
  419

  	
   

  	
  460

  	
   

  
	
  Other
  (income)/expenses

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Equity income(4)(6)

  	
   

  	
  (119

  	
  )

  	
  (81

  	
  )

  
	
  Other expenses(1)(2)(5)

  	
   

  	
  214

  	
   

  	
  233

  	
   

  
	
  Income taxes

  	
   

  	
  123

  	
   

  	
  121

  	
   

  
	
   

  	
   

  	
  218

  	
   

  	
  273

  	
   

  
	
  Income before
  cumulative effect of the application of EITF 02-3 in accordance with U.S.
  GAAP

  	
   

  	
  201

  	
   

  	
  187

  	
   

  
	
  Cumulative
  effect of the application of EITF 02-3, net of tax(3)

  	
   

  	
  (13

  	
  )

  	
  —

  	
   

  
	
  Net income in
  accordance with U.S. GAAP

  	
   

  	
  188

  	
   

  	
  187

  	
   

  

 

Comprehensive Income in
Accordance with U.S. GAAP

 

	
   

  	
   

  	
  Three months ended March 31

  	
   

  
	
   

  	
   

  	
  2003

  	
   

  	
  2002

  	
   

  
	
   

  	
   

  	
  (millions of dollars)

  	
   

  
	
  Net income in
  accordance with U.S. GAAP

  	
   

  	
  188

  	
   

  	
  187

  	
   

  
	
  Adjustments
  affecting comprehensive income under U.S. GAAP

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Additional
  minimum liability for employee future benefits (SFAS No. 87)(12)

  	
   

  	
  4

  	
   

  	
  —

  	
   

  
	
  Tax impact of
  additional minimum liability for employee future benefits

  	
   

  	
  (1

  	
  )

  	
  —

  	
   

  
	
  Unrealized gain
  on derivatives(2)

  	
   

  	
  8

  	
   

  	
  2

  	
   

  
	
  Tax impact of
  gain on derivatives

  	
   

  	
  —

  	
   

  	
  (1

  	
  )

  
	
  Foreign currency
  translation adjustment

  	
   

  	
  (15

  	
  )

  	
  10

  	
   

  
	
  Comprehensive
  income in accordance with U.S. GAAP

  	
   

  	
  184

  	
   

  	
  198

  	
   

  

 

2

 

Condensed
Balance Sheet in Accordance with U.S. GAAP (6)

 

	
   

  	
   

  	
  March 31,
  2003

  	
   

  	
  December
  31, 2002

  	
   

  
	
   

  	
   

  	
  (millions of dollars)

  	
   

  
	
  Current assets

  	
   

  	
  1,006

  	
   

  	
  1,074

  	
   

  
	
  Long-term energy
  trading assets(3)

  	
   

  	
  —

  	
   

  	
  218

  	
   

  
	
  Long-term
  investments(4) (7)

  	
   

  	
  2,041

  	
   

  	
  1,629

  	
   

  
	
  Plant, property
  and equipment(8)

  	
   

  	
  14,803

  	
   

  	
  14,992

  	
   

  
	
  Regulatory asset(9)

  	
   

  	
  2,578

  	
   

  	
  2,578

  	
   

  
	
  Other assets(2)

  	
   

  	
  1,052

  	
   

  	
  893

  	
   

  
	
   

  	
   

  	
  21,480

  	
   

  	
  21,384

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Current
  liabilities(10)

  	
   

  	
  2,165

  	
   

  	
  1,918

  	
   

  
	
  Provision for
  loss on discontinued operations

  	
   

  	
  232

  	
   

  	
  234

  	
   

  
	
  Long-term energy
  trading liabilities(3)

  	
   

  	
  —

  	
   

  	
  41

  	
   

  
	
  Deferred amounts(7)
  (8)

  	
   

  	
  562

  	
   

  	
  593

  	
   

  
	
  Long-term debt(2)

  	
   

  	
  8,745

  	
   

  	
  8,963

  	
   

  
	
  Deferred income
  taxes(9)

  	
   

  	
  2,750

  	
   

  	
  2,692

  	
   

  
	
  Preferred
  securities(11)

  	
   

  	
  694

  	
   

  	
  694

  	
   

  
	
  Trust originated
  preferred securities

  	
   

  	
  218

  	
   

  	
  218

  	
   

  
	
  Shareholders’
  equity

  	
   

  	
  6,114

  	
   

  	
  6,031

  	
   

  
	
   

  	
   

  	
  21,480

  	
   

  	
  21,384

  	
   

  

 

Statement
of Other Comprehensive Income in Accordance with U.S. GAAP

 

	
   

  	
   

  	
  Cumulative  Translation  Account

  	
   

  	
  Minimum  Pension Liability
  (SFAS No. 87)

  	
   

  	
  Cash Flow  Hedges  (SFAS No. 133)

  	
   

  	
  Total

  	
   

  
	
   

  	
   

  	
  (millions of dollars)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Balance at January 1, 2002

  	
   

  	
  13

  	
   

  	
  (56

  	
  )

  	
  (9

  	
  )

  	
  (52

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Additional minimum liability for employee future benefits, net of tax(12)

  	
   

  	
  —

  	
   

  	
  (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

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Additional
  minimum liability for employee future benefits, net of tax(12)

  	
   

  	
  —

  	
   

  	
  3

  	
   

  	
  —

  	
   

  	
  3

  	
   

  
	
  Unrealized
  loss on derivatives, net of tax(2)

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  8

  	
   

  	
  8

  	
   

  
	
  Foreign
  currency translation adjustment

  	
   

  	
  (15

  	
  )

  	
  —

  	
   

  	
  —

  	
   

  	
  (15

  	
  )

  
	
  Balance at
  March 31, 2003

  	
   

  	
  (1

  	
  )

  	
  (93

  	
  )

  	
  (5

  	
  )

  	
  (99

  	
  )

  

(5)          Other
expenses included an allowance for funds used during construction of $1 million
for the three months ended March 31, 2003 (March 31, 2002 - $2 million).

 

3

 

(6)          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.

 

(7)          Effective
January 1, 2003, the Company adopted the provisions of Financial Interpretation
(FIN) 45 that require the recognition of a liability for the fair value of
certain guarantees that require payments contingent on specified types of
future events.  The measurement
standards of FIN 45 are applicable to guarantees entered into after January 1,
2003.  For U.S. GAAP, the Company has
recorded the fair value of the guarantees ($4 million) arising on the
acquisition of the interest in Bruce Power L.P. as a liability and an increase
in the cost of the investment.

 

(8)          Effective
January 1, 2003, the Company adopted the provisions of 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 property,
plant and equipment of the regulated natural gas transmission operations
consist primarily of underground pipelines and above ground compression
equipment and other facilities.  No
amount has been recorded for asset retirement obligations relating to these
assets as it is not possible to make a reasonable estimate of the fair value of
the liability due to the indeterminate timing and scope of the asset
retirements. Management believes that all retirement costs associated with the
regulated pipelines will be recovered through tolls in future periods.

 

The property,
plant and equipment in the power business consists primarily of power plants in
Canada and the United States.  The
estimated fair value of the liability for the power plants and associated
assets as at January 1, 2003 was $6 million. 
The asset retirement cost, net of accumulated depreciation that would
have been recorded if the cost had been recorded in the period in which it
arose, is recorded as an additional cost of the assets as at January 1,
2003.  There were no material changes in
the estimated fair value of the liability during the three months ended March
31, 2003. The Company has no legal liability for asset retirement obligations
with respect to its investment in Bruce Power L.P. and the Sundance A and B
power purchase arrangements.

 

(9)          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.

 

(10)    Current
liabilities at March 31, 2003 include dividends payable of $135 

 

4

 

million (December 31, 2002 - $125 million) and current taxes
payable of  $159 million (December 31,
2002 - $150 million).

 

(11)    Under U.S.
GAAP, the preferred securities are classified as a liability.  The fair value of the preferred securities
at March 31, 2003 was $686 million (December 31, 2002 - $743 million).  The Company made preferred securities
charges payments of $14 million for the three months ended March 31, 2003
(March 31, 2002 - $14 million).

 

(12)    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.

 

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 is expensing stock options granted in 2002 and 2003.  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 $188 million for the three
months ended March 31, 2003 (March 31, 2002 - $186 million) and net income per
share (basic) of $0.38 for the three months ended March 31, 2003 (March 31,
2002 - $0.38 per share).

 

5

 

Summarized Financial Information of
Long-Term Investments

 

 

	
   

  	
   

  	
  Three months ended March 31

  	
   

  
	
   

  	
   

  	
  2003

  	
   

  	
  2002

  	
   

  
	
   

  	
   

  	
  (millions of dollars)

  	
   

  
	
  Income

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Revenues

  	
   

  	
  280

  	
   

  	
  202

  	
   

  
	
  Other costs and
  expenses

  	
   

  	
  (105

  	
  )

  	
  (59

  	
  )

  
	
  Depreciation

  	
   

  	
  (38

  	
  )

  	
  (34

  	
  )

  
	
  Financial
  charges and other

  	
   

  	
  (25

  	
  )

  	
  (28

  	
  )

  
	
  Proportionate
  share of income before income taxes of long-term investments

  	
   

  	
  112

  	
   

  	
  81

  	
   

  
							

 

	
   

  	
   

  	
  March 31,
  2003

  	
   

  	
  December
  31, 2002

  	
   

  
	
   

  	
   

  	
  (millions of dollars)

  	
   

  
	
  Balance sheet

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Current assets

  	
   

  	
  453

  	
   

  	
  246

  	
   

  
	
  Plant, property
  and equipment

  	
   

  	
  3,783

  	
   

  	
  3,197

  	
   

  
	
  Other assets
  (net)

  	
   

  	
  —

  	
   

  	
  112

  	
   

  
	
  Current
  liabilities

  	
   

  	
  (258

  	
  )

  	
  (216

  	
  )

  
	
  Deferred amounts
  (net)

  	
   

  	
  (240

  	
  )

  	
  —

  	
   

  
	
  Non-recourse
  debt

  	
   

  	
  (1,644

  	
  )

  	
  (1,646

  	
  )

  
	
  Deferred income
  taxes

  	
   

  	
  (53

  	
  )

  	
  (64

  	
  )

  
	
  Proportionate
  share of net assets of long-term investments

  	
   

  	
  2,041

  	
   

  	
  1,629

  	
   

  

 

6Exhibit
4.220

 

TRANSCANADA
PIPELINES LIMITED

 

450 — 1st
Street S.W.

Calgary, Alberta, Canada

T2P 5H1

 

 

CERTIFICATION OF CHIEF
EXECUTIVE OFFICER

REGARDING PERIODIC REPORT CONTAINING

FINANCIAL STATEMENTS

 

I, Harold N. Kvisle, the Chief Executive Officer of TransCanada
PipeLines Limited (the “Company”), in compliance with 18 U.S.C.  Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, hereby certify, in connection with the
Company’s Quarterly Report as filed on Form 6-K for the period ended March 31,
2003 with the Securities and Exchange Commission (the “Report”), that:

 

1.               the Report fully
complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and

 

2.               the information
contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.

 

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
  / s /

  	
  Harold N. Kvisle

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Harold N. Kvisle

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  April 25, 2003

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