EXHIBIT 13.2
Consolidated Income
(unaudited) | |||||||||||||||||
(millions of dollars except number of shares and | Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
per share amounts) | 2009 | 2008 | 2009 | 2008 | |||||||||||||
Revenues | 2,253 | 2,137 | 6,760 | 6,287 | |||||||||||||
Operating and Other Expenses/(Income) | |||||||||||||||||
Plant operating costs and other | 879 | 750 | 2,544 | 2,181 | |||||||||||||
Commodity purchases resold | 371 | 324 | 1,100 | 1,053 | |||||||||||||
Other income | (5 | ) | (1 | ) | (20 | ) | (38 | ) | |||||||||
Calpine bankruptcy settlements | - | - | - | (279 | ) | ||||||||||||
Writedown of Broadwater LNG project costs | - | - | - | 41 | |||||||||||||
1,245 | 1,073 | 3,624 | 2,958 | ||||||||||||||
1,008 | 1,064 | 3,136 | 3,329 | ||||||||||||||
Depreciation and amortization | 343 | 318 | 1,034 | 943 | |||||||||||||
665 | 746 | 2,102 | 2,386 | ||||||||||||||
Financial Charges/(Income) | |||||||||||||||||
Interest expense | 216 | 213 | 770 | 617 | |||||||||||||
Financial charges of joint ventures | 17 | 18 | 47 | 51 | |||||||||||||
Interest income and other | (43 | ) | (22 | ) | (99 | ) | (58 | ) | |||||||||
190 | 209 | 718 | 610 | ||||||||||||||
Income before Income Taxes and Non-Controlling Interests | 475 | 537 | 1,384 | 1,776 | |||||||||||||
Income Taxes | |||||||||||||||||
Current | 14 | 127 | 103 | 479 | |||||||||||||
Future | 93 | 2 | 217 | 28 | |||||||||||||
107 | 129 | 320 | 507 | ||||||||||||||
Non-Controlling Interests | |||||||||||||||||
Preferred share dividends of subsidiary | 6 | 6 | 17 | 17 | |||||||||||||
Non-controlling interest in PipeLines LP | 19 | 12 | 51 | 46 | |||||||||||||
Non-controlling interest in Portland | (2 | ) | - | 3 | 43 | ||||||||||||
23 | 18 | 71 | 106 | ||||||||||||||
Net Income | 345 | 390 | 993 | 1,163 | |||||||||||||
Net Income Per Common Share - Basic and Diluted | $0.50 | $0.67 | $1.55 | $2.07 | |||||||||||||
Average Common Shares Outstanding – Basic (millions) | 681 | 579 | 641 | 560 | |||||||||||||
Average Common Shares Outstanding – Diluted (millions) | 682 | 581 | 642 | 562 |
See accompanying notes to the consolidated financial statements.
THIRD QUARTER REPORT 2009 - TRANSCANADA [34
Consolidated Cash Flows
Three months ended September 30 | Nine months ended September 30 | ||||||||||||
(unaudited)(millions of dollars) | 2009 | 2008 | 2009 | 2008 | |||||||||
Cash Generated From Operations | |||||||||||||
Net income | 345 | 390 | 993 | 1,163 | |||||||||
Depreciation and amortization | 343 | 318 | 1,034 | 943 | |||||||||
Future income taxes | 93 | 2 | 217 | 28 | |||||||||
Non-controlling interests | 23 | 18 | 71 | 106 | |||||||||
Employee future benefits funding (in excess of)/lower than expense | (22 | ) | 10 | (79 | ) | 23 | |||||||
Writedown of Broadwater LNG project costs | - | - | - | 41 | |||||||||
Other | (10 | ) | (27 | ) | (6 | ) | 5 | ||||||
772 | 711 | 2,230 | 2,309 | ||||||||||
(Increase)/decrease in operating working capital | (31 | ) | 114 | 362 | 16 | ||||||||
Net cash provided by operations | 741 | 825 | 2,592 | 2,325 | |||||||||
Investing Activities | |||||||||||||
Capital expenditures | (1,557 | ) | (806 | ) | (3,943 | ) | (1,899 | ) | |||||
Acquisitions, net of cash acquired | (653 | ) | (3,054 | ) | (902 | ) | (3,058 | ) | |||||
Disposition of assets, net of current income taxes | - | 21 | - | 21 | |||||||||
Deferred amounts and other | (190 | ) | 58 | (529 | ) | 157 | |||||||
Net cash used in investing activities | (2,400 | ) | (3,781 | ) | (5,374 | ) | (4,779 | ) | |||||
Financing Activities | |||||||||||||
Dividends on common shares | (186 | ) | (143 | ) | (535 | ) | (410 | ) | |||||
Distributions paid to non-controlling interests | (25 | ) | (24 | ) | (76 | ) | (110 | ) | |||||
Notes payable issued/(repaid), net | 77 | (258 | ) | (607 | ) | 466 | |||||||
Long-term debt issued, net of issue costs | 207 | 2,085 | 3,267 | 2,197 | |||||||||
Reduction of long-term debt | (9 | ) | (15 | ) | (509 | ) | (788 | ) | |||||
Long-term debt of joint ventures issued | 93 | 123 | 201 | 157 | |||||||||
Reduction of long-term debt of joint ventures | (52 | ) | (44 | ) | (108 | ) | (101 | ) | |||||
Preferred shares issued, net of issue costs | 539 | - | 539 | - | |||||||||
Common shares issued, net of issue costs | 2 | 6 | 1,805 | 1,252 | |||||||||
Net cash provided by financing activities | 646 | 1,730 | 3,977 | 2,663 | |||||||||
Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalents | (63 | ) | 19 | (97 | ) | 39 | |||||||
(Decrease)/Increase in Cash and Cash Equivalents | (1,076 | ) | (1,207 | ) | 1,098 | 248 | |||||||
Cash and Cash Equivalents | |||||||||||||
Beginning of period | 3,482 | 1,959 | 1,308 | 504 | |||||||||
Cash and Cash Equivalents | |||||||||||||
End of period | 2,406 | 752 | 2,406 | 752 | |||||||||
Supplementary Cash Flow Information | |||||||||||||
Income taxes (refunded)/paid | (63 | ) | 106 | 50 | 418 | ||||||||
Interest paid | 297 | 177 | 834 | 658 |
See accompanying notes to the consolidated financial statements.
THIRD QUARTER REPORT 2009 - TRANSCANADA [35
Consolidated Balance Sheet
September 30, | December 31, | ||||||
(unaudited)(millions of dollars) | 2009 | 2008 | |||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents | 2,406 | 1,308 | |||||
Accounts receivable | 834 | 1,280 | |||||
Inventories | 491 | 489 | |||||
Other | 505 | 523 | |||||
4,236 | 3,600 | ||||||
Plant, Property and Equipment | 32,289 | 29,189 | |||||
Goodwill | 3,855 | 4,397 | |||||
Regulatory Assets | 1,644 | 201 | |||||
Other Assets | 2,132 | 2,027 | |||||
44,156 | 39,414 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current Liabilities | |||||||
Notes payable | 1,324 | 1,702 | |||||
Accounts payable | 2,350 | 1,876 | |||||
Accrued interest | 342 | 359 | |||||
Current portion of long-term debt | 678 | 786 | |||||
Current portion of long-term debt of joint ventures | 235 | 207 | |||||
4,929 | 4,930 | ||||||
Regulatory Liabilities | 430 | 551 | |||||
Deferred Amounts | 723 | 1,168 | |||||
Future Income Taxes | 2,784 | 1,223 | |||||
Long-Term Debt | 16,730 | 15,368 | |||||
Long-Term Debt of Joint Ventures | 855 | 869 | |||||
Junior Subordinated Notes | 1,061 | 1,213 | |||||
27,512 | 25,322 | ||||||
Non-Controlling Interests | |||||||
Non-controlling interest in PipeLines LP | 561 | 721 | |||||
Preferred shares of subsidiary | 389 | 389 | |||||
Non-controlling interest in Portland | 77 | 84 | |||||
1,027 | 1,194 | ||||||
Shareholders’ Equity | 15,617 | 12,898 | |||||
44,156 | 39,414 |
See accompanying notes to the consolidated financial statements.
THIRD QUARTER REPORT 2009 - TRANSCANADA [36
Consolidated Comprehensive Income
Three months ended September 30 | Nine months ended September 30 | ||||||||||||
(unaudited)(millions of dollars) | 2009 | 2008 | 2009 | 2008 | |||||||||
Net Income | 345 | 390 | 993 | 1,163 | |||||||||
Other Comprehensive (Loss)/Income, Net of Income Taxes | |||||||||||||
Change in foreign currency translation gains and losses on investments in foreign operations(1) | (230 | ) | 107 | (381 | ) | 146 | |||||||
Change in gains and losses on hedges of investments in foreign operations(2) | 113 | (79 | ) | 209 | (103 | ) | |||||||
Change in gains and losses on derivative instruments designated as cash flow hedges(3) | 16 | 7 | 80 | 40 | |||||||||
Reclassification to net income of gains and losses on derivative instruments designated as cash flow hedges pertaining to prior periods(4) | (1 | ) | (6 | ) | (6 | ) | (24 | ) | |||||
Other Comprehensive (Loss)/Income | (102 | ) | 29 | (98 | ) | 59 | |||||||
Comprehensive Income | 243 | 419 | 895 | 1,222 |
(1) | Net of income tax expense of $68 million and $68 million for the three and nine months ended September 30, 2009, respectively (2008 – recovery of $23 million and $43 million, respectively). |
(2) | Net of income tax expense of $50 million and $102 million for the three and nine months ended September 30, 2009, respectively (2008 – recovery of $36 million and $50 million, respectively). |
(3) | Net of income tax expense of $4 million and $20 million for the three and nine months ended September 30, 2009, respectively (2008 – $25 million recovery and $24 million expense, respectively). |
(4) | Net of income tax expense of $4 million and $4 million for the three and nine months ended September 30, 2009, respectively (2008 – recovery of $9 million and $20 million, respectively). |
See accompanying notes to the consolidated financial statements.
THIRD QUARTER REPORT 2009 - TRANSCANADA [37
Consolidated Accumulated Other Comprehensive Income
Currency | Cash Flow | |||||||||
Translation | Hedges and | |||||||||
(unaudited)(millions of dollars) | Adjustments | Other | Total | |||||||
Balance at December 31, 2008 | (379 | ) | (93 | ) | (472 | ) | ||||
Change in foreign currency translation gains and losses on investments in foreign operations(1) | (381 | ) | - | (381 | ) | |||||
Change in gains and losses on hedges of investments in foreign operations(2) | 209 | - | 209 | |||||||
Change in gains and losses on derivative instruments designated as cash flow hedges(3) | - | 80 | 80 | |||||||
Reclassification to net income of gains and losses on derivative instruments designated as cash flow hedges pertaining to prior periods(4)(5) | - | (6 | ) | (6 | ) | |||||
Balance at September 30, 2009 | (551 | ) | (19 | ) | (570 | ) | ||||
Balance at December 31, 2007 | (361 | ) | (12 | ) | (373 | ) | ||||
Change in foreign currency translation gains and losses on investments in foreign operations(1) | 146 | - | 146 | |||||||
Change in gains and losses on hedges of investments in foreign operations(2) | (103 | ) | - | (103 | ) | |||||
Change in gains and losses on derivative instruments designated as cash flow hedges(3) | - | 40 | 40 | |||||||
Reclassification to net income of gains and losses on derivative instruments designated as cash flow hedges pertaining to prior periods(4) | - | (24 | ) | (24 | ) | |||||
Balance at September 30, 2008 | (318 | ) | 4 | (314 | ) |
(1) | Net of income tax expense of $68 million for the nine months ended September 30, 2009 (2008 - $43 million recovery). |
(2) | Net of income tax expense of $102 million for the nine months ended September 30, 2009 (2008 - $50 million recovery). |
(3) | Net of income tax expense of $20 million for the nine months ended September 30, 2009 (2008 - $24 million expense). |
(4) | Net of income tax expense of $4 million for the nine months ended September 30, 2009 (2008 - $20 million recovery). |
(5) | The amount of gains related to cash flow hedges reported in Accumulated Other Comprehensive Income that is expected to be reclassified to Net Income in the next 12 months is estimated to be $30 million ($25 million, net of tax). These estimates assume constant commodity prices, interest rates and foreign exchange rates over time, however, the amounts reclassified will vary based on the actual value of these factors at the date of settlement. |
See accompanying notes to the consolidated financial statements.
THIRD QUARTER REPORT 2009 - TRANSCANADA [38
Consolidated Shareholders’ Equity
Nine months ended September 30 | |||||||
(unaudited)(millions of dollars) | 2009 | 2008 | |||||
Common Shares | |||||||
Balance at beginning of period | 9,264 | 6,662 | |||||
Proceeds from shares issued under public offering, net of issue costs | 1,792 | 1,235 | |||||
Shares issued under dividend reinvestment plan | 182 | 177 | |||||
Proceeds from shares issued on exercise of stock options | 13 | 17 | |||||
Balance at end of period | 11,251 | 8,091 | |||||
Preferred Shares | |||||||
Balance at beginning of period | - | - | |||||
Proceeds from shares issued under public offering, net of issue costs | 539 | - | |||||
Balance at end of period | 539 | - | |||||
Contributed Surplus | |||||||
Balance at beginning of period | 279 | 276 | |||||
Increased ownership in PipeLines LP (Note 8) | 49 | - | |||||
Issuance of stock options | 3 | 2 | |||||
Balance at end of period | 331 | 278 | |||||
Retained Earnings | |||||||
Balance at beginning of period | 3,827 | 3,220 | |||||
Net income | 993 | 1,163 | |||||
Common share dividends | (754 | ) | (612 | ) | |||
Balance at end of period | 4,066 | 3,771 | |||||
Accumulated Other Comprehensive Income | |||||||
Balance at beginning of period | (472 | ) | (373 | ) | |||
Other comprehensive income | (98 | ) | 59 | ||||
Balance at end of period | (570 | ) | (314 | ) | |||
3,496 | 3,457 | ||||||
Total Shareholders’ Equity | 15,617 | 11,826 |
See accompanying notes to the consolidated financial statements.
THIRD QUARTER REPORT 2009 - TRANSCANADA [39
Notes to Consolidated Financial Statements
(Unaudited)
1. | Significant Accounting Policies |
The consolidated financial statements of TransCanada Corporation (TransCanada or the Company) have been prepared in accordance with Canadian generally accepted accounting principles (GAAP). The accounting policies applied are consistent with those outlined in TransCanada's annual audited Consolidated Financial Statements for the year ended December 31, 2008, except as described in Note 2. These Consolidated Financial Statements reflect all normal recurring adjustments that are, in the opinion of management, necessary to present fairly the financial position and results of operations for the respective periods. These Consolidated Financial Statements do not include all disclosures required in the annual financial statements and should be read in conjunction with the 2008 audited Consolidated Financial Statements included in TransCanada’s 2008 Annual Report. Unless otherwise indicated, “TransCanada“ or “the Company“ includes TransCanada Corporation and its subsidiaries. Amounts are stated in Canadian dollars unless otherwise indicated. Certain comparative figures have been reclassified to conform with the current year’s presentation.
In Pipelines, which consists primarily of the Company's investments in regulated pipelines and regulated natural gas storage facilities, annual revenues and net income fluctuate over the long term based on regulators' decisions and negotiated settlements with shippers. Generally, quarter-over-quarter revenues and net income during any particular fiscal year remain relatively stable with fluctuations resulting from adjustments being recorded due to regulatory decisions and negotiated settlements with shippers, seasonal fluctuations in short-term throughput volumes on U.S. pipelines, acquisitions and divestitures, and developments outside of the normal course of operations.
In Energy, which consists primarily of the Company’s investments in electrical power generation plants and non-regulated natural gas storage facilities, quarter-over-quarter revenues and net income are affected by seasonal weather conditions, customer demand, market prices, capacity payments, planned and unplanned plant outages, acquisitions and divestitures, certain fair value adjustments and developments outside of the normal course of operations.
In preparing these financial statements, TransCanada is required to make estimates and assumptions that affect both the amount and timing of recording assets, liabilities, revenues and expenses as the determination of these items may be dependent on future events. The Company uses the most current information available and exercises careful judgement in making these 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. | Changes in Accounting Policies |
The Company’s accounting policies have not changed materially from those described in TransCanada’s 2008 Annual Report except as follows:
THIRD QUARTER REPORT 2009 - TRANSCANADA [40
2009 Accounting Changes
Rate-Regulated Operations
Effective January 1, 2009, the temporary exemption was withdrawn from the Canadian Institute of Chartered Accountants (CICA) Handbook Section 1100 “Generally Accepted Accounting Principles”, which permitted the recognition and measurement of assets and liabilities arising from rate regulation. In addition, Section 3465 “Income Taxes” was amended to require the recognition of future income tax assets and liabilities for rate-regulated entities. The Company chose to adopt accounting policies consistent with the U.S. Financial Accounting Standards Board’s Financial Accounting Standard (FAS) 71 “Accounting for the Effects of Certain Types of Regulation”. As a result, TransCanada retained its current method of accounting for its rate-regulated operations, except that TransCanada is required to recognize future income tax assets and liabilities, instead of using the taxes payable method, and records an offsetting adjustment to regulatory assets and liabilities. As a result of adopting this accounting change, additional future income tax liabilities and a regulatory asset in the amount of $1.4 billion were recorded January 1, 2009 in each of Future Income Taxes and Regulatory Assets, respectively.
Adjustments to the 2009 financial statements have been made in accordance with the transitional provisions for Section 3465, which required a cumulative adjustment in the current period to Future Income Taxes and Regulatory Assets. Restatement of prior periods’ financial statements was not permitted under Section 3465.
Intangible Assets
Effective January 1, 2009, the Company adopted CICA Handbook Section 3064 “Goodwill and Intangible Assets”, which replaced Section 3062 “Goodwill and Other Intangible Assets”. Section 3064 gives guidance on the recognition of intangible assets as well as the recognition and measurement of internally developed intangible assets. In addition, Section 3450 “Research and Development Costs” was withdrawn from the CICA Handbook. Adopting this accounting change did not have a material effect on the Company’s financial statements.
Credit Risk and the Fair Value of Financial Assets and Financial Liabilities
Effective January 1, 2009, the Company adopted the accounting provisions of Emerging Issues Committee (EIC) Abstract EIC 173, “Credit Risk and the Fair Value of Financial Assets and Financial Liabilities”. Under EIC 173 an entity’s own credit risk and the credit risk of its counterparties is taken into account in determining the fair value of financial assets and financial liabilities, including derivative instruments. Adopting this accounting change did not have a material effect on the Company’s financial statements.
Future Accounting Changes
International Financial Reporting Standards
The CICA’s Accounting Standards Board announced that Canadian publicly accountable enterprises are required to adopt International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), effective January 1, 2011. The Company will prepare its financial statements under IFRS commencing January 1, 2011.
Under existing Canadian GAAP, TransCanada follows specific accounting policies unique to a rate-regulated business. TransCanada is actively monitoring developments regarding potential future guidance on the applicability of certain aspects of rate-regulated accounting under IFRS. Developments in this area could have a significant effect on the scope of the Company’s IFRS project and on TransCanada’s financial results under IFRS. On July 23, 2009, the IASB issued an exposure draft “Rate-regulated Activities” and the Company is assessing the impact of this exposure draft on TransCanada.
THIRD QUARTER REPORT 2009 - TRANSCANADA [41
At the current stage of its IFRS project, TransCanada cannot reasonably determine the full impact that adopting IFRS would have on its financial position and future results.
Financial Instruments Disclosure
The CICA implemented revisions to Handbook Section 3862 “Financial Instruments – Disclosures” for fiscal years ending after September 30, 2009. These revisions are intended to align the disclosure requirements for financial instruments to the maximum extent possible with the disclosure required under IFRS. These revisions require additional disclosure based on a three level hierarchy that reflects the significance of inputs used in measuring fair value. Fair values of assets and liabilities included in Level 1 are determined by reference to quoted prices in active markets for identical assets and liabilities. Fair values of assets and liabilities included in Level 2 include valuations using inputs other than quoted prices for which all significant outputs are observable, either directly or indirectly. Fair values of assets and liabilities included in Level 3 valuations are based on inputs that are unobservable and significant to the overall fair value measurement. These changes will be applied by TransCanada effective December 31, 2009.
3. | Segmented Information |
Effective January 1, 2009, TransCanada revised its presentation of certain income and expense items in the Consolidated Statement of Income to better reflect the operating and financing structure of the Company. To conform with the new presentation, certain of the income and expense amounts pertaining to operations that were previously classified on the Consolidated Income Statement as Other Expenses/(Income) are now included in Operating and Other Expenses/(Income). Depreciation expense has been redefined as Depreciation and Amortization expense and includes amortization of $14 million and $43 million in the three and nine months ended September 30, 2009, respectively (2008 - $14 million and $43 million, respectively), for power purchase arrangements, which was previously included in Commodity Purchases Resold. Support services costs previously allocated to Pipelines and Energy of $25 million and $87 million in the three and nine months ended September 30, 2009, respectively (2008 - $24 million and $75 million, respectively), are now included in Corporate. In addition, amounts related to Interest Expense and Financial Charges of Joint Ventures, Interest Income and Other, Income Taxes and Non-Controlling Interests are no longer reported on a segmented basis. Segmented information has been retroactively reclassified to reflect these changes. These changes had no impact on reported consolidated Net Income.
THIRD QUARTER REPORT 2009 - TRANSCANADA [42
Three months ended September 30 | Pipelines | Energy | Corporate | Total | ||||||||||||||||
(unaudited)(millions of dollars) | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | ||||||||||||
Revenues | 1,152 | 1,141 | 1,101 | 996 | - | - | 2,253 | 2,137 | ||||||||||||
Plant operating costs and other | (427 | ) | (421 | ) | (424 | ) | (306 | ) | (28 | ) | (23 | ) | (879 | ) | (750 | ) | ||||
Commodity purchases resold | - | - | (371 | ) | (324 | ) | - | - | (371 | ) | (324 | ) | ||||||||
Other income/(expense) | 5 | 3 | - | (2 | ) | - | - | 5 | 1 | |||||||||||
730 | 723 | 306 | 364 | (28 | ) | (23 | ) | 1,008 | 1,064 | |||||||||||
Depreciation and amortization | (255 | ) | (254 | ) | (88 | ) | (64 | ) | - | - | (343 | ) | (318 | ) | ||||||
475 | 469 | 218 | 300 | (28 | ) | (23 | ) | 665 | 746 | |||||||||||
Interest expense | (216 | ) | (213 | ) | ||||||||||||||||
Financial charges of joint ventures | (17 | ) | (18 | ) | ||||||||||||||||
Interest income and other | 43 | 22 | ||||||||||||||||||
Income taxes | (107 | ) | (129 | ) | ||||||||||||||||
Non-controlling interests | (23 | ) | (18 | ) | ||||||||||||||||
Net Income | 345 | 390 |
Nine months ended September 30 | Pipelines | Energy | Corporate | Total | ||||||||||||||||
(unaudited)(millions of dollars) | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | ||||||||||||
Revenues | 3,558 | 3,417 | 3,202 | 2,870 | - | - | 6,760 | 6,287 | ||||||||||||
Plant operating costs and other | (1,227 | ) | (1,194 | ) | (1,227 | ) | (910 | ) | (90 | ) | (77 | ) | (2,544 | ) | (2,181 | ) | ||||
Commodity purchases resold | - | - | (1,100 | ) | (1,053 | ) | - | - | (1,100 | ) | (1,053 | ) | ||||||||
Other income/(expense) | 17 | 33 | 2 | (1 | ) | 1 | 6 | 20 | 38 | |||||||||||
Calpine bankruptcy settlements | - | 279 | - | - | - | - | - | 279 | ||||||||||||
Writedown of Broadwater LNG project costs | - | - | - | (41 | ) | - | - | - | (41 | ) | ||||||||||
2,348 | 2,535 | 877 | 865 | (89 | ) | (71 | ) | 3,136 | 3,329 | |||||||||||
Depreciation and amortization | (773 | ) | (765 | ) | (261 | ) | (178 | ) | - | - | (1,034 | ) | (943 | ) | ||||||
1,575 | 1,770 | 616 | 687 | (89 | ) | (71 | ) | 2,102 | 2,386 | |||||||||||
Interest expense | (770 | ) | (617 | ) | ||||||||||||||||
Financial charges of joint ventures | (47 | ) | (51 | ) | ||||||||||||||||
Interest income and other | 99 | 58 | ||||||||||||||||||
Income taxes | (320 | ) | (507 | ) | ||||||||||||||||
Non-controlling interests | (71 | ) | (106 | ) | ||||||||||||||||
Net Income | 993 | 1,163 |
THIRD QUARTER REPORT 2009 - TRANSCANADA [43
For the years ended December 31, 2008 and 2007, segmented information has been retroactively reclassified to reflect all changes.
For the year ended December 31 | Pipelines | Energy | Corporate | Total | ||||||||||||||||
(unaudited)(millions of dollars) | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 | ||||||||||||
Revenues | 4,650 | 4,712 | 3,969 | 4,116 | - | - | 8,619 | 8,828 | ||||||||||||
Plant operating costs and other | (1,645 | ) | (1,590 | ) | (1,307 | ) | (1,336 | ) | (110 | ) | (104 | ) | (3,062 | ) | (3,030 | ) | ||||
Commodity purchases resold | - | (72 | ) | (1,453 | ) | (1,829 | ) | - | - | (1,453 | ) | (1,901 | ) | |||||||
Calpine bankruptcy settlements | 279 | - | - | 16 | - | - | 279 | 16 | ||||||||||||
Writedown of Broadwater LNG project costs | - | - | (41 | ) | - | - | - | (41 | ) | - | ||||||||||
Other income | 31 | 27 | 1 | 3 | 6 | 2 | 38 | 32 | ||||||||||||
3,315 | 3,077 | 1,169 | 970 | (104 | ) | (102 | ) | 4,380 | 3,945 | |||||||||||
Depreciation and amortization | (989 | ) | (1,021 | ) | (258 | ) | (216 | ) | - | - | (1,247 | ) | (1,237 | ) | ||||||
2,326 | 2,056 | 911 | 754 | (104 | ) | (102 | ) | 3,133 | 2,708 | |||||||||||
Interest expense | (943 | ) | (943 | ) | ||||||||||||||||
Financial charges of joint ventures | (72 | ) | (75 | ) | ||||||||||||||||
Interest income and other | 54 | 120 | ||||||||||||||||||
Income taxes | (602 | ) | (490 | ) | ||||||||||||||||
Non-controlling interests | (130 | ) | (97 | ) | ||||||||||||||||
Net Income | 1,440 | 1,223 |
Total Assets
(unaudited)(millions of dollars) | September 30, 2009 | December 31, 2008 | |||||
Pipelines | 28,895 | 25,020 | |||||
Energy | 12,078 | 12,006 | |||||
Corporate | 3,183 | 2,388 | |||||
44,156 | 39,414 |
4. | Long-Term Debt |
On October 20, 2009, the Company retired $250 million of 10.625 per cent debentures.
In April 2009, TCPL filed a $2.0 billion Canadian Medium-Term Notes shelf prospectus to replace a March 2007 $1.5 billion Canadian Medium-Term Notes shelf prospectus, which expired in April 2009. No amounts have been issued under this shelf prospectus.
In February 2009, TCPL issued Medium-Term Notes of $300 million and $400 million maturing in February 2014 and February 2039, respectively, and bearing interest at 5.05 per cent and 8.05 per cent, respectively. These notes were issued under the $1.5 billion debt shelf prospectus filed in March 2007.
In January 2009, TCPL issued Senior Unsecured Notes of US$750 million and US$1.25 billion maturing in January 2019 and January 2039, respectively, and bearing interest at 7.125 per cent and 7.625 per cent, respectively. These notes were issued under a US$3.0 billion debt shelf prospectus filed in January 2009, which has remaining capacity of US$1.0 billion.
In the three and nine months ended September 30, 2009, the Company capitalized interest related to capital projects of $113 million and $230 million, respectively (2008 - - $38 million and $97 million, respectively).
THIRD QUARTER REPORT 2009 - TRANSCANADA [44
5. | Share Capital |
On September 30, 2009, TransCanada completed a public offering of 22 million cumulative redeemable first preferred shares under the September 21, 2009 prospectus, discussed below, for gross proceeds of $550 million. The holders of the preferred shares are entitled to receive fixed cumulative dividends at an annual rate of $1.15 per share, payable quarterly, yielding 4.6 per cent per annum, for the initial five-year period ending December 31, 2014, with the first dividend payment date scheduled for December 31, 2009. The dividend rate will reset on December 31, 2014 and every five years thereafter to a yield per annum equal to the then sum of the five-year Government of Canada bond yield and 1.92 per cent. The preferred shares are redeemable by TransCanada on or after December 31, 2014 at a price of $25 per share plus all accrued and unpaid dividends.
The preferred shareholders will have the right to convert their shares into Series 2 cumulative redeemable first preferred shares on December 31, 2014 and on December 31 of every fifth year thereafter. The holders of Series 2 preferred shares will be entitled to receive quarterly floating rate cumulative dividends at a yield per annum equal to the sum of the then 90-day Government of Canada treasury bill rate and 1.92 per cent.
On September 21, 2009, TransCanada filed a short form base shelf prospectus qualifying for issuance $3.0 billion of common shares, first or second preferred shares and/or subscription receipts in Canada and the U.S. until October 2011. This base shelf prospectus replaced the base shelf prospectus filed in July 2008, which was exhausted by the common share issue discussed below.
In June 2009, TransCanada completed a public offering of 58.4 million common shares, including full exercise of an underwriters’ over-allotment option. Proceeds from the common share offering and the over-allotment option totalled $1.8 billion.
In the three and nine months ended September 30, 2009, TransCanada issued 2.5 million and 6.0 million common shares, respectively, under its Dividend Reinvestment and Share Purchase Plan (DRP), in lieu of making cash dividend payments totalling $73 million and $182 million, respectively. In the three and nine months ended September 30, 2008, TransCanada issued 1.7 million and 4.8 million common shares, respectively, under its DRP, in lieu of making cash dividend payments totalling $65 million and $177 million, respectively. The dividends under the DRP were paid with common shares issued from treasury.
6. | Financial Instruments and Risk Management |
TransCanada continues to manage and monitor its exposure to market, counterparty credit and liquidity risk.
Counterparty Credit and Liquidity Risk
TransCanada’s maximum counterparty credit exposure with respect to financial instruments at the balance sheet date, without taking into account security held, consisted primarily of the carrying amount, which approximates fair value, of non-derivative financial assets, such as accounts receivable, as well as the fair value of derivative assets. Letters of credit and cash are the primary types of security provided to support these amounts. The Company does not have significant concentrations of counterparty credit risk with any individual counterparties and the majority of counterparty credit exposure is with counterparties who are investment grade. At September 30, 2009, there were no significant amounts past due or impaired.
THIRD QUARTER REPORT 2009 - TRANSCANADA [45
As a level of uncertainty in the global financial markets remains, TransCanada continues to closely monitor and reassess the creditworthiness of its counterparties. This has resulted in TransCanada reducing or mitigating its exposure to certain counterparties where it is deemed warranted and permitted under contractual terms. As part of its ongoing operations, TransCanada must balance its market and counterparty credit risks when making business decisions.
The Company continues to manage its liquidity risk by ensuring sufficient cash and credit facilities are available to meet its operating and capital expenditure obligations when due, under both normal and stressed economic conditions.
VaR Analysis
TransCanada uses a Value-at-Risk (VaR) methodology to estimate the potential impact from its exposure to market risk on its open liquid positions. VaR represents the potential change in pre-tax earnings over a given holding period. It is calculated assuming a 95 per cent confidence level that the daily change resulting from normal market fluctuations in its open positions will not exceed the reported VaR. Although losses are not expected to exceed the statistically estimated VaR on 95 per cent of occasions, losses on the other five per cent of occasions could be substantially greater than the estimated VaR. TransCanada’s consolidated VaR was $14 million at September 30, 2009 (December 31, 2008 – $23 million). The decrease from December 31, 2008 was primarily due to decreased prices and lower open positions in the U.S. Power portfolio.
Natural Gas Inventory
At September 30, 2009, the fair value of proprietary natural gas inventory held in storage, as measured using a weighted average of forward prices for the following four months less selling costs, was $73 million (December 31, 2008 - $76 million).
The change in fair value of proprietary natural gas inventory in storage in the three and nine months ended September 30, 2009 resulted in a net pre-tax unrealized gain of $16 million and a net pre-tax unrealized loss of $13 million, respectively (2008 – unrealized losses of $108 million and $6 million, respectively), which were recorded to Revenues and Inventories. The net change in fair value of natural gas forward purchase and sales contracts in the three and nine months ended September 30, 2009 resulted in a net pre-tax unrealized loss of $2 million and a net pre-tax unrealized gain of $7 million, respectively (2008 - unrealized gain of $106 million and unrealized loss of $1 million), which were included in Revenues.
Net Investment in Self-Sustaining Foreign Operations
The Company hedges its net investment in self-sustaining foreign operations with U.S. dollar-denominated debt, cross-currency swaps and foreign exchange forward contracts and options. At September 30, 2009, the Company had designated as a net investment hedge U.S. dollar-denominated debt with a carrying value of $8.1 billion (US$7.6 billion) and a fair value of $9.2 billion (US$8.6 billion). At September 30, 2009, Other Assets included $51 million for the fair value of derivatives used to hedge the Company’s net U.S. dollar investment in foreign operations.
THIRD QUARTER REPORT 2009 - TRANSCANADA [46
Information for the derivatives used to hedge the Company’s net investment in its self-sustaining foreign operations is as follows:
Derivatives Hedging Net Investment in Self-Sustaining Foreign Operations
September 30, 2009 | December 31, 2008 | ||||||||||||
Asset/(Liability) (unaudited) (millions of dollars) | Fair Value(1) | Notional or Principal Amount | Fair Value(1) | Notional or Principal Amount | |||||||||
U.S. dollar cross-currency swaps | |||||||||||||
(maturing 2009 to 2014)(2) | 40 | U.S. 1,650 | (218 | ) | U.S. 1,650 | ||||||||
U.S. dollar forward foreign exchange contracts | |||||||||||||
(maturing 2009 to 2010)(2) | 7 | U.S. 635 | (42 | ) | U.S. 2,152 | ||||||||
U.S. dollar options | |||||||||||||
(maturing 2009)(2) | 4 | U.S. 400 | 6 | U.S. 300 | |||||||||
51 | U.S. 2,685 | (254 | ) | U.S. 4,102 |
(1) | Fair values equal carrying values. |
(2) | As at September 30, 2009. |
Non-Derivative Financial Instruments Summary
The carrying and fair values of non-derivative financial instruments were as follows:
September 30, 2009 | December 31, 2008 | ||||||||||||
(unaudited) (millions of dollars) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||
Financial Assets(1) | |||||||||||||
Cash and cash equivalents | 2,406 | 2,406 | 1,308 | 1,308 | |||||||||
Accounts receivable and other assets(2)(3) | 983 | 983 | 1,404 | 1,404 | |||||||||
Available-for-sale assets(2) | 23 | 23 | 27 | 27 | |||||||||
3,412 | 3,412 | 2,739 | 2,739 | ||||||||||
Financial Liabilities(1)(3) | |||||||||||||
Notes payable | 1,324 | 1,324 | 1,702 | 1,702 | |||||||||
Accounts payable and deferred amounts(4) | 1,606 | 1,606 | 1,372 | 1,372 | |||||||||
Accrued interest | 342 | 342 | 359 | 359 | |||||||||
Long-term debt and junior subordinated notes | 18,469 | 21,388 | 17,367 | 16,152 | |||||||||
Long-term debt of joint ventures | 1,090 | 1,149 | 1,076 | 1,052 | |||||||||
22,831 | 25,809 | 21,876 | 20,637 |
(1) | Consolidated Net Income in 2009 and 2008 included unrealized gains or losses of nil for the fair value adjustments to each of these financial instruments. |
(2) | At September 30, 2009, the Consolidated Balance Sheet included financial assets of $834 million (December 31, 2008 – $1,257 million) in Accounts Receivable and $172 million (December 31, 2008 - $174 million) in Other Assets. |
(3) | Recorded at amortized cost. |
(4) | At September 30, 2009, the Consolidated Balance Sheet included financial liabilities of $1,604 million (December 31, 2008 – $1,350 million) in Accounts Payable and $2 million (December 31, 2008 - $22 million) in Deferred Amounts. |
THIRD QUARTER REPORT 2009 - TRANSCANADA [47
Derivative Financial Instruments Summary
Information for the Company’s derivative financial instruments, excluding hedges of the Company’s net investment in self-sustaining foreign operations, is as follows:
September 30, 2009 | |||||||||||||||
(unaudited) (all amounts in millions unless otherwise indicated) | Power | Natural Gas | Oil Products | Foreign Exchange | Interest | ||||||||||
Derivative Financial Instruments Held for Trading(1) | |||||||||||||||
Fair Values(2) | |||||||||||||||
Assets | $126 | $129 | $4 | $4 | $35 | ||||||||||
Liabilities | $(71 | ) | $(134 | ) | $(3 | ) | $(64 | ) | $(81 | ) | |||||
Notional Values | |||||||||||||||
Volumes(3) | |||||||||||||||
Purchases | 9,876 | 204 | 180 | - | - | ||||||||||
Sales | 9,718 | 171 | 228 | - | - | ||||||||||
Canadian dollars | - | - | - | - | 699 | ||||||||||
U.S. dollars | - | - | - | U.S. 426 | U.S. 1,425 | ||||||||||
Cross-currency | - | - | - | 227/U.S. 157 | - | ||||||||||
Net unrealized (losses)/gains in the period(4) | |||||||||||||||
Three months ended September 30, 2009 | $(8 | ) | $21 | $(1 | ) | $2 | $(7 | ) | |||||||
Nine months ended September 30, 2009 | $11 | $(4 | ) | $1 | $4 | $20 | |||||||||
Net realized gains/(losses) in the period(4) | |||||||||||||||
Three months ended September 30, 2009 | $23 | $(43 | ) | $1 | $11 | $(5 | ) | ||||||||
Nine months ended September 30, 2009 | $53 | $(56 | ) | - | $28 | $(14 | ) | ||||||||
Maturity dates | 2009-2014 | 2009-2014 | 2009-2010 | 2009-2012 | 2009-2018 | ||||||||||
Derivative Financial Instruments in Hedging Relationships(5)(6) | |||||||||||||||
Fair Values(2) | |||||||||||||||
Assets | $229 | $2 | - | - | $6 | ||||||||||
Liabilities | $(154 | ) | $(15 | ) | - | $(36 | ) | $(67 | ) | ||||||
Notional Values | |||||||||||||||
Volumes(3) | |||||||||||||||
Purchases | 13,597 | 24 | - | - | - | ||||||||||
Sales | 14,806 | - | - | - | - | ||||||||||
U.S. dollars | - | - | - | - | 1,825 | ||||||||||
Cross-currency | - | - | - | 136/U.S. 100 | - | ||||||||||
Net realized gains/(losses) in the period(4) | |||||||||||||||
Three months ended September 30, 2009 | $30 | $(8 | ) | - | - | $(10 | ) | ||||||||
Nine months ended September 30, 2009 | $108 | $(28 | ) | - | - | $(27 | ) | ||||||||
Maturity dates | 2009-2015 | 2009-2012 | n/a | 2009- 2013 | 2010-2020 |
(1) | All derivative financial instruments in the held-for-trading classification have been entered into for risk management purposes and are subject to the Company’s risk management strategies, policies and limits. These include derivatives that have not been designated as hedges or do not qualify for hedge accounting treatment but have been entered into as economic hedges to manage the Company’s exposures to market risk. |
(2) | Fair values equal carrying values. |
(3) | Volumes for power, natural gas and oil products derivatives are in GWh, Bcf and thousands of barrels, respectively. |
THIRD QUARTER REPORT 2009 - TRANSCANADA [48
(4) | Realized and unrealized gains and losses on power, natural gas and oil products derivative financial instruments held for trading are included in Revenues. Realized and unrealized gains and losses on interest rate and foreign exchange derivative financial instruments held for trading are included in Interest Expense and Interest Income and Other, respectively. The effective portion of unrealized gains and losses on derivative financial instruments in hedging relationships are initially recognized in Other Comprehensive Income, and are reclassified to Revenues, Interest Expense and Interest Income and Other, as appropriate, as the original hedged item settles. |
(5) | All hedging relationships are designated as cash flow hedges except for interest rate derivative financial instruments designated as fair value hedges with a fair value of $6 million and a notional amount of US$150 million. Net realized gains on fair value hedges for the three and nine months ended September 30, 2009 were $1 million and $3 million, respectively, and were included in Interest Expense. In third quarter 2009, the Company did not record any amounts in Net Income related to ineffectiveness for fair value hedges. |
(6) | Net Income for the three and nine months ended September 30, 2009 included gains of $1 million and $2 million, respectively, for the changes in fair value of power and natural gas cash flow hedges that were ineffective in offsetting the change in fair value of their related underlying positions. There were no gains or losses included in Net Income for the three and nine months ended September 30, 2009 for discontinued cash flow hedges. No amounts have been excluded from the assessment of hedge effectiveness. |
THIRD QUARTER REPORT 2009 - TRANSCANADA [49
2008 | ||||||||||||||||
(unaudited) (all amounts in millions unless otherwise indicated) | Power | Natural Gas | Oil Products | Foreign Exchange | Interest | |||||||||||
Derivative Financial Instruments Held for Trading | ||||||||||||||||
Fair Values(1)(4) | ||||||||||||||||
Assets | $132 | $144 | $10 | $41 | $57 | |||||||||||
Liabilities | $(82 | ) | $(150 | ) | $(10 | ) | $(55 | ) | $(117 | ) | ||||||
Notional Values(4) | ||||||||||||||||
Volumes(2) | ||||||||||||||||
Purchases | 4,035 | 172 | 410 | - | - | |||||||||||
Sales | 5,491 | 162 | 252 | - | - | |||||||||||
Canadian dollars | - | - | - | - | 1,016 | |||||||||||
U.S. dollars | - | - | - | U.S. 479 | U.S. 1,575 | |||||||||||
Japanese yen (in billions) | - | - | - | JPY 4.3 | - | |||||||||||
Cross-currency | - | - | - | 227/ U.S. 157 | - | |||||||||||
Net unrealized gains/(losses) in the period(3) | ||||||||||||||||
Three months ended September 30, 2008 | $5 | $(1 | ) | - | - | $5 | ||||||||||
Nine months ended September 30, 2008 | - | $(12 | ) | - | $(7 | ) | $3 | |||||||||
Net realized gains/(losses) in the period(3) | ||||||||||||||||
Three months ended September 30, 2008 | $12 | $(11 | ) | - | $2 | $2 | ||||||||||
Nine months ended September 30, 2008 | $21 | $(6 | ) | - | $12 | $12 | ||||||||||
Maturity dates(4) | 2009-2014 | 2009-2011 | 2009 | 2009-2012 | 2009-2018 | |||||||||||
Derivative Financial Instruments in Hedging Relationships(5)(6) | ||||||||||||||||
Fair Values(1)(4) | ||||||||||||||||
Assets | $115 | - | - | $2 | $8 | |||||||||||
Liabilities | $(160 | ) | $(18 | ) | - | $(24 | ) | $(122 | ) | |||||||
Notional Values(4) | ||||||||||||||||
Volumes(2) | ||||||||||||||||
Purchases | 8,926 | 9 | - | - | - | |||||||||||
Sales | 13,113 | - | - | - | - | |||||||||||
Canadian dollars | - | - | - | - | 50 | |||||||||||
U.S. dollars | - | - | - | U.S. 15 | U.S. 1,475 | |||||||||||
Cross-currency | - | - | - | 136/ U.S. 100 | - | |||||||||||
Net realized gains/(losses) in the period(3) | ||||||||||||||||
Three months ended September 30, 2008 | $14 | $(1 | ) | - | - | $(2 | ) | |||||||||
Nine months ended September 30, 2008 | $(24 | ) | $18 | - | - | $(4 | ) | |||||||||
Maturity dates(4) | 2009-2014 | 2009-2011 | n/a | 2009-2013 | 2009-2019 |
(1) | Fair values equal carrying values. |
(2) | Volumes for power, natural gas and oil products derivatives are in GWh, Bcf and thousands of barrels, respectively. |
(3) | Realized and unrealized gains and losses on power, natural gas and oil products derivative financial instruments held for trading are included in Revenues. Realized and unrealized gains and losses on interest rate and foreign exchange derivative financial instruments held for trading are included in Interest Expense and Interest Income and Other, respectively. The effective portion of unrealized gains and losses on derivative financial instruments in hedging relationships are initially recognized in Other Comprehensive Income, and are reclassified to Revenues, Interest Expense and Interest Income and Other, as appropriate, as the original hedged item settles. |
(4) | As at December 31, 2008. |
(5) | All hedging relationships are designated as cash flow hedges except for interest rate derivative financial instruments designated as fair value hedges with a fair value of $8 million and notional amounts of $50 million and US$50 million at December 31, 2008. Net realized gains on fair value hedges for the three and nine months ended September 30, 2008 were $1 million and $1 million, respectively, and were included in Interest Expense. In third quarter 2008, the Company did not record any amounts in Net Income related to ineffectiveness for fair value hedges. |
THIRD QUARTER REPORT 2009 - TRANSCANADA [50
(6) | Net Income for the three and nine months ended September 30, 2008 included gains of $7 million and $4 million, respectively, for the changes in fair value of power and natural gas cash flow hedges that were ineffective in offsetting the change in fair value of their related underlying positions. There were no gains or losses included in Net Income for the three and nine months ended September 30, 2008 for discontinued cash flow hedges. No amounts have been excluded from the assessment of hedge effectiveness. |
Balance Sheet Presentation of Derivative Financial Instruments
The fair value of the derivative financial instruments in the Company’s Balance Sheet was as follows:
(unaudited) | |||||||
(millions of dollars) | September 30, 2009 | December 31, 2008 | |||||
Current | |||||||
Other current assets | 370 | 318 | |||||
Accounts payable | (359 | ) | (298 | ) | |||
Long-term | |||||||
Other assets | 216 | 191 | |||||
Deferred amounts | (266 | ) | (694 | ) |
7. | Employee Future Benefits |
The net benefit plan expense for the Company’s defined benefit pension plans and other post-employment benefit plans is as follows:
Three months ended September 30 | Pension Benefit Plans | Other Benefit Plans | |||||||||||
(unaudited)(millions of dollars) | 2009 | 2008 | 2009 | 2008 | |||||||||
Current service cost | 11 | 13 | - | - | |||||||||
Interest cost | 22 | 20 | 2 | 2 | |||||||||
Expected return on plan assets | (24 | ) | (23 | ) | - | - | |||||||
Amortization of net actuarial loss | 2 | 4 | 1 | 1 | |||||||||
Amortization of past service costs | 1 | 1 | - | - | |||||||||
Net benefit cost recognized | 12 | 15 | 3 | 3 |
Nine months ended September 30 | Pension Benefit Plans | Other Benefit Plans | |||||||||||
(unaudited)(millions of dollars) | 2009 | 2008 | 2009 | 2008 | |||||||||
Current service cost | 34 | 38 | 1 | 1 | |||||||||
Interest cost | 67 | 59 | 6 | 6 | |||||||||
Expected return on plan assets | (75 | ) | (69 | ) | (1 | ) | (1 | ) | |||||
Amortization of transitional obligation related to regulated business | - | - | 1 | 1 | |||||||||
Amortization of net actuarial loss | 4 | 13 | 2 | 2 | |||||||||
Amortization of past service costs | 3 | 3 | - | - | |||||||||
Net benefit cost recognized | 33 | 44 | 9 | 9 |
8. | Acquisitions and Dispositions |
On August 14, 2009, TransCanada purchased ConocoPhillips’ remaining 20 per cent ownership interest in Keystone for US$553 million plus the assumption of US$197 million of short-term indebtedness. The acquisition increased TransCanada’s ownership interest in Keystone to 100 per cent. The purchase price reflects ConocoPhillips’ capital contributions to date and includes an allowance for funds used during construction. TransCanada began fully consolidating Keystone in the Pipelines segment upon acquisition.
THIRD QUARTER REPORT 2009 - TRANSCANADA [51
On July 1, 2009, TransCanada sold the North Baja pipeline to PipeLines LP. As part of the transaction, TransCanada agreed to amend its incentive distribution rights with PipeLines LP. TransCanada received aggregate consideration totalling approximately US$395 million from PipeLines LP, including US$200 million in cash and 6,371,680 common units of PipeLines LP. PipeLines LP utilized US$170 million of its US$250 million committed and available bank facility to fund this transaction. TransCanada’s ownership in PipeLines LP increased to 42.6 per cent as a result of this transaction. TransCanada’s increased ownership in PipeLines LP resulted in a decrease in Non-Controlling Interests and an increase in Contributed Surplus.
9. | Commitments, Guarantees and Contingencies |
Commitments
On August 14, 2009, the Company acquired ConocoPhillips’ remaining interest in Keystone. As a result, TransCanada assumed responsibility for ConocoPhillips’ share of the capital investment required to complete the project, which is expected to result in an incremental commitment of US$1.7 billion through the end of 2012.
Guarantees
As a result of the acquisition of the remaining interest in Keystone, the Company’s potential exposure to guarantees of jointly owned entities was reduced by an estimated $305 million to $678 million since December 31, 2008.
Contingencies
Amounts received under the Bruce B floor price mechanism in any year are subject to repayment if spot prices in the remainder of that year increase above the floor price. With respect to 2009, TransCanada currently expects spot prices to be less than the floor price for the remainder of the year, therefore, no amounts recorded in revenue in the first nine months of 2009 are expected to be repaid.
10. | Subsequent Events |
Subsequent events have been assessed up to November 3, 2009, which is the date the financial statements were available for issuance.
TransCanada welcomes questions from shareholders and potential investors. Please telephone: |
Investor Relations, at (800) 361-6522 (Canada and U.S. Mainland) or direct dial David Moneta/Myles Dougan/Terry Hook at (403) 920-7911. The investor fax line is (403) 920-2457. Media Relations: Terry Cunha/ Cecily Dobson (403) 920-7859 or (800) 608-7859. |
Visit the TransCanada website at: http://www.transcanada.com. |