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Share Information
As at June 30, 2004, TCPL had 480,668,109 issued and outstanding common shares. In addition, there were 4,000,000 Series U and 4,000,000 Series Y Cumulative First Preferred Shares issued and outstanding as at June 30, 2004.
Selected Quarterly Consolidated Financial Data(1)
| 2004 | 2003 | 2002 | ||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Second | First | Fourth | Third | Second | First | Fourth | Third | |||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||
| (millions of dollars except per share amounts) | ||||||||||||||||||||||||
Revenues | 1,256 | 1,233 | 1,319 | 1,391 | 1,311 | 1,336 | 1,338 | 1,285 | |||||||||||||||||
Net Income applicable to common shares | |||||||||||||||||||||||||
Continuing operations | 388 | 214 | 193 | 198 | 202 | 208 | 180 | 175 | |||||||||||||||||
Discontinued operations | — | — | — | 50 | — | — | — | — | |||||||||||||||||
388 | 214 | 193 | 248 | 202 | 208 | 180 | 175 | ||||||||||||||||||
Share Statistics | |||||||||||||||||||||||||
Net income per share — Basic | |||||||||||||||||||||||||
Continuing operations | $ | 0.81 | $ | 0.44 | $ | 0.40 | $ | 0.41 | $ | 0.42 | $ | 0.43 | $ | 0.37 | $ | 0.37 | |||||||||
Discontinued operations | — | — | — | 0.11 | — | — | — | — | |||||||||||||||||
$ | 0.81 | $ | 0.44 | $ | 0.40 | $ | 0.52 | $ | 0.42 | $ | 0.43 | $ | 0.37 | $ | 0.37 | ||||||||||
Net income per share — Diluted | $ | 0.81 | $ | 0.44 | $ | 0.40 | $ | 0.52 | $ | 0.42 | $ | 0.43 | $ | 0.37 | $ | 0.36 | |||||||||
- (1)
- The selected quarterly consolidated financial data has been prepared in accordance with Canadian GAAP. Certain comparative figures have been reclassified to conform with the current year's presentation. For a discussion on the factors affecting the comparability of the financial data, including discontinued operations, refer to Note 1 and Note 18 of TCPL's 2003 audited consolidated financial statements included in TCPL's 2003 Annual Report.
Factors Impacting Quarterly Financial Information
In the Gas Transmission business, which consists primarily of the company's investments in regulated pipelines, annual revenues and net earnings fluctuate over the long term based on regulators' decisions and negotiated settlements with shippers. Generally, quarter over quarter revenues and earnings during any particular fiscal year remain fairly stable with fluctuations arising as a result of adjustments being recorded due to regulatory decisions and negotiated settlements with shippers and due to items outside of the normal course of operations.
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In the Power business, which consists primarily of the company's investments in electrical power generation plants, quarter over quarter revenues and net earnings are affected by seasonal weather conditions, customer demand, market prices, planned and unplanned plant outages as well as items outside of the normal course of operations.
Significant items which impacted the last eight quarters' net earnings are as follows.
- •
- In first quarter 2003, TCPL completed the acquisition of a 31.6 per cent interest in Bruce Power, resulting in increased earnings in the Power business in 2004 and 2003 compared to 2002.
- •
- In first quarter 2003, TCPL reached a one-year Alberta System Revenue Requirement Settlement for 2003 which included a fixed revenue requirement component of $1.277 billion compared to $1.347 billion in 2002, resulting in lower earnings in the Transmission business in 2003 compared to 2002.
- •
- Second quarter 2003 net earnings included a $19 million positive after-tax earnings impact of a June 2003 settlement with a former counterparty that had previously defaulted under power forward contracts.
- •
- Third quarter 2003 net earnings included TCPL's $11 million share of a future income tax benefit adjustment recognized by TransGas de Occidente S.A.
- •
- First quarter 2004 net earnings included approximately $12 million of income tax refunds and refund interest.
- •
- Second quarter 2004 net earnings included gains related to Power LP of $187 million.
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Certain information in this quarterly report is forward-looking and is subject to important risks and uncertainties. The results or events predicted in this information may differ from actual results or events. Factors which could cause actual results or events to differ materially from current expectations include, among other things, the ability of TCPL to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits, the availability and price of energy commodities, regulatory decisions, competitive factors in the pipeline and power industry sectors, and the prevailing economic conditions in North America. For additional information on these and other factors, see the reports filed by TCPL with Canadian securities regulators and with the United States Securities and Exchange Commission. TCPL disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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| Three months ended June 30 | Six months ended June 30 | |||||||
---|---|---|---|---|---|---|---|---|---|
| 2004 | 2003 | 2004 | 2003 | |||||
| (unaudited) (millions of dollars) | ||||||||
Revenues | 1,256 | 1,311 | 2,489 | 2,647 | |||||
Operating Expenses | |||||||||
Cost of sales | 152 | 189 | 279 | 369 | |||||
Other costs and expenses | 400 | 382 | 774 | 809 | |||||
Depreciation | 232 | 217 | 464 | 432 | |||||
784 | 788 | 1,517 | 1,610 | ||||||
Operating Income | 472 | 523 | 972 | 1,037 | |||||
Other Expenses/(Income) | |||||||||
Financial charges | 199 | 205 | 394 | 409 | |||||
Financial charges of joint ventures | 16 | 23 | 30 | 45 | |||||
Equity income | (59 | ) | (26 | ) | (117 | ) | (84 | ) | |
Interest and other income | (17 | ) | (22 | ) | (32 | ) | (35 | ) | |
Gains related to Power LP | (197 | ) | — | (197 | ) | — | |||
(58 | ) | 180 | 78 | 335 | |||||
Income from Continuing Operations before Income Taxes and Non-Controlling Interests | 530 | 343 | 894 | 702 | |||||
Income Taxes | |||||||||
Current | 131 | 74 | 238 | 136 | |||||
Future | (2 | ) | 53 | 21 | 127 | ||||
Non-Controlling Interests | — | — | 6 | — | |||||
Net Income | 401 | 216 | 629 | 439 | |||||
Preferred Securities Charges | 8 | 9 | 16 | 18 | |||||
Preferred Share Dividends | 5 | 5 | 11 | 11 | |||||
Net Income Applicable to Common Shares | 388 | 202 | 602 | 410 | |||||
See accompanying Notes to the Consolidated Financial Statements.
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Consolidated Cash Flows
| Three months ended June 30 | Six months ended June 30 | |||||||
---|---|---|---|---|---|---|---|---|---|
| 2004 | 2003 | 2004 | 2003 | |||||
| (unaudited) (millions of dollars) | ||||||||
Cash Generated From Operations | |||||||||
Net income | 401 | 216 | 629 | 439 | |||||
Depreciation | 232 | 217 | 464 | 432 | |||||
Future income taxes | (2 | ) | 53 | 21 | 127 | ||||
Gains related to Power LP | (197 | ) | — | (197 | ) | — | |||
Equity income in excess of distributions received | (39 | ) | (8 | ) | (90 | ) | (59 | ) | |
Other | (5 | ) | (44 | ) | (14 | ) | (48 | ) | |
Funds generated from operations | 390 | 434 | 813 | 891 | |||||
(Increase)/Decrease in operating working capital | (30 | ) | 33 | (72 | ) | 25 | |||
Net cash provided by continuing operations | 360 | 467 | 741 | 916 | |||||
Net cash used in discontinued operations | (8 | ) | (88 | ) | (10 | ) | (84 | ) | |
352 | 379 | 731 | 832 | ||||||
Investing Activities | |||||||||
Capital expenditures | (93 | ) | (107 | ) | (194 | ) | (183 | ) | |
Acquisitions, net of cash acquired | (14 | ) | (3 | ) | (14 | ) | (412 | ) | |
Disposition of assets | 408 | �� | — | 408 | — | ||||
Deferred amounts and other | 32 | (47 | ) | (13 | ) | (65 | ) | ||
Net cash provided by/(used in) investing activities | 333 | (157 | ) | 187 | (660 | ) | |||
Financing Activities | |||||||||
Dividends and preferred securities charges | (158 | ) | (149 | ) | (306 | ) | (288 | ) | |
Notes payable repaid, net | (72 | ) | (291 | ) | (301 | ) | (82 | ) | |
Long-term debt issued | — | 475 | 665 | 475 | |||||
Reduction of long-term debt | (25 | ) | (50 | ) | (501 | ) | (59 | ) | |
Non-recourse debt of joint ventures issued | 81 | 29 | 87 | 46 | |||||
Reduction of non-recourse debt of joint ventures | (3 | ) | (32 | ) | (12 | ) | (48 | ) | |
Partnership units of joint ventures issued | 88 | — | 88 | — | |||||
Common shares issued | — | 2 | — | 18 | |||||
Net cash (used in)/provided by financing activities | (89 | ) | (16 | ) | (280 | ) | 62 | ||
Increase in Cash and Short-Term Investments | 596 | 206 | 638 | 234 | |||||
Cash and Short-Term Investments | |||||||||
Beginning of period | 379 | 240 | 337 | 212 | |||||
Cash and Short-Term Investments | |||||||||
End of period | 975 | 446 | 975 | 446 | |||||
Supplementary Cash Flow Information | |||||||||
Income taxes paid | 91 | 69 | 252 | 124 | |||||
Interest paid | 221 | 238 | 393 | 428 | |||||
See accompanying Notes to the Consolidated Financial Statements.
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| June 30, 2004 | December 31, 2003 | |||
---|---|---|---|---|---|
| (unaudited) | | |||
| (millions of dollars) | ||||
ASSETS | |||||
Current Assets | |||||
Cash and short-term investments | 975 | 337 | |||
Accounts receivable | 586 | 603 | |||
Inventories | 161 | 165 | |||
Other | 143 | 88 | |||
1,865 | 1,193 | ||||
Long-Term Investments | 827 | 733 | |||
Plant, Property and Equipment | 17,005 | 17,460 | |||
Other Assets | 1,361 | 1,164 | |||
21,058 | 20,550 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
Current Liabilities | |||||
Notes payable | 66 | 367 | |||
Accounts payable | 985 | 1,069 | |||
Accrued interest | 215 | 208 | |||
Current portion of long-term debt | 597 | 550 | |||
Current portion of non-recourse debt of joint ventures | 25 | 19 | |||
1,888 | 2,213 | ||||
Deferred Amounts | 540 | 475 | |||
Long-Term Debt | 9,807 | 9,465 | |||
Future Income Taxes | 436 | 427 | |||
Non-Recourse Debt of Joint Ventures | 853 | 761 | |||
Junior Subordinated Debentures | 20 | 22 | |||
13,544 | 13,363 | ||||
Non-Controlling Interests | 81 | 82 | |||
Shareholders' Equity | |||||
Preferred securities | 671 | 672 | |||
Preferred shares | 389 | 389 | |||
Common shares | 4,632 | 4,632 | |||
Contributed surplus | 269 | 267 | |||
Retained earnings | 1,505 | 1,185 | |||
Foreign exchange adjustment | (33 | ) | (40 | ) | |
7,433 | 7,105 | ||||
21,058 | 20,550 | ||||
See accompanying Notes to the Consolidated Financial Statements.
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Consolidated Retained Earnings
| Six months ended June 30 | ||||
---|---|---|---|---|---|
| 2004 | 2003 | |||
| (unaudited) (millions of dollars) | ||||
Balance at beginning of period | 1,185 | 854 | |||
Net income | 629 | 439 | |||
Preferred securities charges | (16 | ) | (18 | ) | |
Preferred share dividends | (11 | ) | (11 | ) | |
Common share dividends | (282 | ) | (259 | ) | |
1,505 | 1,005 | ||||
See accompanying Notes to the Consolidated Financial Statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Significant Accounting Policies
The consolidated financial statements of TransCanada PipeLines Limited (TCPL 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 TCPL's annual financial statements for the year ended December 31, 2003 except as stated below. 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 annual financial statements included in TCPL's 2003 Annual Report. Amounts are stated in Canadian dollars unless otherwise indicated. Certain comparative figures have been reclassified to conform with the current period's presentation.
Since a determination of many assets, liabilities, revenues and expenses is dependent upon future events, the preparation of these consolidated financial statements requires the use of estimates and assumptions. In the opinion of Management, these consolidated financial statements have been properly prepared within reasonable limits of materiality and within the framework of the company's significant accounting policies.
2. Accounting Changes
Asset Retirement Obligations
Effective January 1, 2004, the company adopted the new standard of the Canadian Institute of Chartered Accountants (CICA) Handbook Section "Asset Retirement Obligations", which addresses financial accounting and reporting for obligations associated with asset retirement costs. This section 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. This accounting change was applied retroactively with restatement of prior periods.
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The plant, property 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 it is reasonable to assume that all retirement costs associated with the regulated pipelines will be recovered through tolls in future periods.
The impact of this accounting change resulted in an increase of $2 million in the estimated fair value of the liability for TCPL's Other Gas Transmission assets as at January 1, 2003 and December 31, 2003. The estimated fair value of this liability as at June 30, 2004 was $11 million.
The plant, property and equipment in the Power business consists primarily of power plants in Canada and the United States. The impact of this accounting change resulted in an increase of $6 million and $7 million in the estimated fair value of the liability for the power plants and associated assets as at January 1, 2003 and December 31, 2003, respectively. 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. The estimated fair value of the liability as at June 30, 2004 was $23 million. The company has no legal liability for asset retirement obligations with respect to its investment in Bruce Power and the Sundance A and B power purchase arrangements.
The impact of this change on TCPL's net income in prior periods was nil while the impact of this change in the three and six months ended June 30, 2004 was $1 million.
Hedging Relationships
Effective January 1, 2004, the company adopted the provisions of the CICA's new Accounting Guideline "Hedging Relationships" that specifies the circumstances in which hedge accounting is appropriate, including the identification, documentation, designation and effectiveness of hedges, and the discontinuance of hedge accounting. In accordance with the provisions of this new guideline, TCPL has recorded all derivatives on the Consolidated Balance Sheet at fair value.
This new guideline was applied prospectively and resulted in an increase in net income of $4 million and $2 million for the three and six months ended June 30, 2004, respectively. The significant impact of the accounting change on the Consolidated Balance Sheet as at January 1, 2004 is as follows.
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| Increase/(Decrease) | |||
---|---|---|---|---|
| (unaudited — millions of dollars) | |||
Current Assets | ||||
Other | 8 | |||
Other Assets | 123 | |||
Total Assets | 131 | |||
Current Liabilities | ||||
Accounts Payable | 8 | |||
Deferred Amounts | 132 | |||
Long-Term Debt | (7 | ) | ||
Future Income Taxes | (1 | ) | ||
Total Liabilities | 132 | |||
Generally Accepted Accounting Principles
Effective January 1, 2004, the company adopted the new standard of the CICA Handbook Section "Generally Accepted Accounting Principles" that defines primary sources of GAAP and the other sources that need to be considered in the application of GAAP. The new standard eliminates the ability to rely on industry practice to support a particular accounting policy.
This accounting change was applied prospectively and there was no impact on net income in the three and six months ended June 30, 2004. In prior periods, in accordance with industry practice, certain assets and liabilities related to the company's regulated activities, and offsetting deferral accounts, were not recognized on the balance sheet. The impact of the change on the consolidated balance sheet as at January 1, 2004 is as follows.
| Increase/(Decrease) | ||
---|---|---|---|
| (unaudited — millions of dollars) | ||
Other Assets | 153 | ||
Deferred Amounts | 80 | ||
Long-Term Debt | 76 | ||
Preferred Securities | (3 | ) | |
Total Liabilities | 153 | ||
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3. Segmented Information
| Three months ended June 30 | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Gas Transmission | Power | Corporate | Total | |||||||||||||
| 2004 | 2003 | 2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||||
| (unaudited — millions of dollars) | ||||||||||||||||
Revenues | 948 | 944 | 308 | 367 | — | — | 1,256 | 1,311 | |||||||||
Cost of sales | — | — | (152 | ) | (189 | ) | — | — | (152 | ) | (189 | ) | |||||
Other costs and expenses | (298 | ) | (301 | ) | (101 | ) | (79 | ) | (1 | ) | (2 | ) | (400 | ) | (382 | ) | |
Depreciation | (215 | ) | (195 | ) | (17 | ) | (22 | ) | — | — | (232 | ) | (217 | ) | |||
Operating income/(loss) | 435 | 448 | 38 | 77 | (1 | ) | (2 | ) | 472 | 523 | |||||||
Financial and preferred equity charges and non-controlling interests | (189 | ) | (194 | ) | (2 | ) | (3 | ) | (21 | ) | (22 | ) | (212 | ) | (219 | ) | |
Financial charges of joint ventures | (15 | ) | (22 | ) | (1 | ) | (1 | ) | — | — | (16 | ) | (23 | ) | |||
Equity income | 11 | 10 | 48 | 16 | — | — | 59 | 26 | |||||||||
Interest and other income | 9 | 3 | 1 | 4 | 7 | 15 | 17 | 22 | |||||||||
Gains related to Power LP | — | — | 197 | — | — | — | 197 | — | |||||||||
Income taxes | (105 | ) | (101 | ) | (32 | ) | (30 | ) | 8 | 4 | (129 | ) | (127 | ) | |||
Net Income Applicable to Common Shares | 146 | 144 | 249 | 63 | (7 | ) | (5 | ) | 388 | 202 | |||||||
Six months ended June 30 | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Gas Transmission | Power | Corporate | Total | |||||||||||||
| 2004 | 2003 | 2004 | 2003 | 2004 | 2003 | 2004 | 2003 | |||||||||
| (unaudited — millions of dollars) | ||||||||||||||||
Revenues | 1,897 | 1,904 | 592 | 743 | — | — | 2,489 | 2,647 | |||||||||
Cost of sales | — | — | (279 | ) | (369 | ) | — | — | (279 | ) | (369 | ) | |||||
Other costs and expenses | (583 | ) | (605 | ) | (188 | ) | (200 | ) | (3 | ) | (4 | ) | (774 | ) | (809 | ) | |
Depreciation | (427 | ) | (389 | ) | (37 | ) | (43 | ) | — | — | (464 | ) | (432 | ) | |||
Operating income/(loss) | 887 | 910 | 88 | 131 | (3 | ) | (4 | ) | 972 | 1,037 | |||||||
Financial and preferred equity charges and non-controlling interests | (381 | ) | (390 | ) | (4 | ) | (5 | ) | (42 | ) | (43 | ) | (427 | ) | (438 | ) | |
Financial charges of joint ventures | (29 | ) | (44 | ) | (1 | ) | (1 | ) | — | — | (30 | ) | (45 | ) | |||
Equity income | 21 | 30 | 96 | 54 | — | — | 117 | 84 | |||||||||
Interest and other income | 12 | 8 | 5 | 8 | 15 | 19 | 32 | 35 | |||||||||
Gains related to Power LP | — | — | 197 | — | — | — | 197 | — | |||||||||
Income taxes | (215 | ) | (212 | ) | (67 | ) | (61 | ) | 23 | 10 | (259 | ) | (263 | ) | |||
Net Income Applicable to Common Shares | 295 | 302 | 314 | 126 | (7 | ) | (18 | ) | 602 | 410 | |||||||
Total Assets
| June 30, 2004 | December 31, 2003 | ||
---|---|---|---|---|
| (unaudited) | | ||
| (millions of dollars) | |||
Gas Transmission | 16,814 | 16,974 | ||
Power | 2,602 | 2,753 | ||
Corporate | 1,637 | 812 | ||
Continuing Operations | 21,053 | 20,539 | ||
Discontinued Operations | 5 | 11 | ||
21,058 | 20,550 | |||
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4. Risk Management and Financial Instruments
The following represents the material changes to the company's risk management and financial instruments since December 31, 2003 and reflects the impacts of the hedge accounting changes adopted prospectively, effective January 1, 2004, as further discussed under Note 2, Accounting Changes — Hedging Relationships.
Foreign Exchange and Interest Rate Management Activity
The company manages certain foreign exchange risks of U.S. dollar debt and interest rate exposures of the Alberta System, the Canadian Mainline and the Foothills System through the use of foreign currency and interest rate derivatives. These derivatives are comprised of contracts for periods up to eight years. Certain of the realized gains and losses on interest rate derivatives are shared with shippers on predetermined terms.
Asset/(Liability)
| June 30, 2004 | December 31, 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
| Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||
| (unaudited) | | | |||||||
| (millions of dollars) | |||||||||
Foreign Exchange | ||||||||||
Cross-currency swaps | (12 | ) | (12 | ) | (26 | ) | (26 | ) | ||
Interest Rate | ||||||||||
Interest rate swaps | ||||||||||
Canadian dollars | 18 | 18 | 2 | 15 | ||||||
U.S. dollars | 7 | 7 | — | 8 | ||||||
At June 30, 2004, the principal amounts of cross-currency swaps was US$282 million (December 31, 2003 — US$282 million). Notional principal amounts for interest rate swaps were $669 million (December 31, 2003 — $964 million) and US$100 million (December 31, 2003 — US$100 million).
The company manages the foreign exchange risk and interest rate exposures of its other U.S. dollar debt through the use of foreign currency and interest rate derivatives. These derivatives are comprised of contracts for periods up to nine years. The fair values of the interest rate derivatives are shown in the table below.
Asset/(Liability)
| June 30, 2004 | December 31, 2003 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
| Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||
| (unaudited) | | | |||||||
| (millions of dollars) | |||||||||
Interest Rate | ||||||||||
Interest rate swaps | ||||||||||
Canadian dollars | (6 | ) | (6 | ) | 1 | (3 | ) | |||
U.S. dollars | 28 | 28 | 2 | 37 | ||||||
Forward Foreign Exchange Contracts | ||||||||||
U.S. dollars | (2 | ) | (2 | ) | — | 1 | ||||
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At June 30, 2004, the notional principal amount for interest rate swaps was $200 million (December 31, 2003 — $150 million) and US$550 million (December 31, 2003 — US$500 million). The principal amount of forward foreign exchange contracts was US$200 million (December 31, 2003 — US$19 million).
5. Power LP
On April 30, 2004, TCPL sold the ManChief and Curtis Palmer power facilities for US$402.6 million, before closing adjustments, to TransCanada Power, L.P. (Power LP) and recognized a gain of $15 million after tax. Power LP funded the purchase through an issue of 8.1 million subscription receipts, which closed April 15, 2004, and third party debt. As part of the subscription receipts offering, TCPL purchased 540,000 subscription receipts for an aggregate purchase price of approximately $20 million. The subscription receipts were subsequently converted into partnership units. The net impact of this issue reduced TCPL's ownership interest in Power LP from 35.6 per cent to 30.6 per cent.
At a special meeting held on April 29, 2004, Power LP's unitholders approved an amendment to the terms of the Power LP Partnership Agreement to remove Power LP's obligation to redeem all units not owned by TCPL at June 30, 2017. TCPL was required to fund this redemption, thus the removal of Power LP's obligation eliminates this requirement. The removal of the obligation and the reduction in TCPL's ownership interest in Power LP resulted in a gain of $172 million. This amount primarily reflects the recognition of unamortized gains on previous Power LP transactions.
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6. Employee Future Benefits
The net benefit plan expense for the company's defined benefit pension plans and other post-employment benefit plans for the three and six months ended June 30 is as follows.
| Three months ended June 30 | |||||||
---|---|---|---|---|---|---|---|---|
| Pension Benefit Plans | Other Benefit Plans | ||||||
| 2004 | 2003 | 2004 | 2003 | ||||
| (unaudited — millions of dollars) | |||||||
Current service cost | 7 | 7 | 1 | 1 | ||||
Interest cost | 14 | 13 | 2 | 2 | ||||
Expected return on plan assets | (13 | ) | (13 | ) | — | — | ||
Amortization of net actuarial loss | 3 | 2 | — | — | ||||
Net benefit cost recognized | 11 | 9 | 3 | 3 | ||||
Six months ended June 30 | ||||||||
---|---|---|---|---|---|---|---|---|
| Pension Benefit Plans | Other Benefit Plans | ||||||
| 2004 | 2003 | 2004 | 2003 | ||||
| (unaudited — millions of dollars) | |||||||
Current service cost | 14 | 13 | 1 | 1 | ||||
Interest cost | 28 | 26 | 3 | 3 | ||||
Expected return on plan assets | (27 | ) | (26 | ) | — | — | ||
Amortization of transitional obligation related to regulated business | — | — | 1 | 1 | ||||
Amortization of net actuarial loss | 6 | 4 | 1 | 1 | ||||
Amortization of past service cost | 1 | 1 | — | — | ||||
Net benefit cost recognized | 22 | 18 | 6 | 6 | ||||
7. Acquisition of Gas Transmission Northwest Corporation
On February 24, 2004, TCPL announced an agreement to acquire Gas Transmission Northwest Corporation (GTN) from National Energy & Gas Transmission Inc. (NEGT) for approximately US$1.7 billion, including US$0.5 billion of assumed debt and subject to closing adjustments. GTN is a natural gas pipeline company that owns and operates two pipeline systems. TCPL has satisfied its pre-closing conditions under the purchase agreement and is awaiting the implementation of NEGT's plan of reorganization, which is the only remaining material closing condition in the transaction. The purchase is expected to close late in third quarter or early in fourth quarter of this year.
TCPL 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 Stein at (403) 920-7911. The investor fax line is (403) 920-2457. Media Relations: Hejdi Feick/Kurt Kadatz at (403) 920-7859
Visit TCPL's Internet site at: http://www.transcanada.com
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Forward-Looking Information
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)