Exhibit 4.218
Consolidated Income
Three months ended March 31 (unaudited) |
| 2003 |
| 2002 |
| ||
Revenues |
| 1,336 |
| 1,246 |
| ||
|
|
|
|
|
| ||
Operating Expenses |
|
|
|
|
| ||
Cost of sales |
| 180 |
| 133 |
| ||
Other costs and expenses |
| 427 |
| 354 |
| ||
Depreciation |
| 215 |
| 207 |
| ||
|
| 822 |
| 694 |
| ||
|
|
|
|
|
| ||
Operating Income |
| 514 |
| 552 |
| ||
|
|
|
|
|
| ||
Other Expenses/(Income) |
|
|
|
|
| ||
Financial charges |
| 204 |
| 221 |
| ||
Financial charges of joint ventures |
| 22 |
| 23 |
| ||
Equity income |
| (58 | ) | (10 | ) | ||
Interest and other income |
| (13 | ) | (11 | ) | ||
|
| 155 |
| 223 |
| ||
|
|
|
|
|
| ||
Income before Income Taxes |
| 359 |
| 329 |
| ||
Income Taxes - Current and Future |
| 136 |
| 128 |
| ||
Net Income |
| 223 |
| 201 |
| ||
Preferred Securities Charges |
| 9 |
| 9 |
| ||
Preferred Share Dividends |
| 6 |
| 5 |
| ||
Net Income Applicable to Common Shares |
| 208 |
| 187 |
| ||
|
|
|
|
|
| ||
Net Income Per Share - Basic and Diluted |
| $ | 0.43 |
| $ | 0.39 |
|
|
|
|
|
|
| ||
Average Shares Outstanding - Basic (millions) |
| 480.1 |
| 477.0 |
| ||
Average Shares Outstanding - Diluted (millions) |
| 481.9 |
| 479.1 |
| ||
See accompanying Notes to the Consolidated Financial Statements.
Consolidated Cash Flows
Three months ended March 31 (unaudited) |
| 2003 |
| 2002 |
|
|
|
|
|
|
|
Cash Generated From Operations |
|
|
|
|
|
Net income |
| 223 |
| 201 |
|
Depreciation |
| 215 |
| 207 |
|
Future income taxes |
| 74 |
| 53 |
|
Equity income in excess of distributions received |
| (51 | ) | (4 | ) |
Other |
| (4 | ) | (2 | ) |
Funds generated from operations |
| 457 |
| 455 |
|
Increase in operating working capital |
| (8 | ) | (54 | ) |
Net cash provided by continuing operations |
| 449 |
| 401 |
|
Net cash provided by discontinued operations |
| 4 |
| 58 |
|
|
| 453 |
| 459 |
|
Investing Activities |
|
|
|
|
|
Capital expenditures |
| (76 | ) | (117 | ) |
Acquisitions, net of cash acquired |
| (409 | ) | — |
|
Disposition of assets |
| 5 |
| — |
|
Deferred amounts and other |
| (23 | ) | 17 |
|
Net cash used in investing activities |
| (503 | ) | (100 | ) |
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
Dividends and preferred securities charges |
| (139 | ) | (127 | ) |
Notes payable issued/(repaid), net |
| 209 |
| (171 | ) |
Reduction of long-term debt |
| (9 | ) | (92 | ) |
Non-recourse debt of joint ventures issued |
| 17 |
| 1 |
|
Reduction of non-recourse debt of joint ventures |
| (16 | ) | (13 | ) |
Common shares issued |
| 16 |
| 15 |
|
Net cash provided by/(used in) financing activities |
| 78 |
| (387 | ) |
|
|
|
|
|
|
Increase/(Decrease) in Cash and Short-Term Investments |
| 28 |
| (28 | ) |
|
|
|
|
|
|
Cash and Short-Term Investments |
|
|
|
|
|
Beginning of period |
| 212 |
| 299 |
|
|
|
|
|
|
|
Cash and Short-Term Investments |
|
|
|
|
|
End of period |
| 240 |
| 271 |
|
See accompanying Notes to the Consolidated Financial Statements.
Consolidated Balance Sheet
(millions of dollars) |
| March 31, 2003 |
| December 31, |
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
Current Assets |
|
|
|
|
|
Cash and short-term investments |
| 240 |
| 212 |
|
Accounts receivable |
| 724 |
| 691 |
|
Inventories |
| 167 |
| 178 |
|
Other |
| 84 |
| 102 |
|
|
| 1,215 |
| 1,183 |
|
Long-Term Investments |
| 725 |
| 291 |
|
Plant, Property and Equipment |
| 17,220 |
| 17,496 |
|
Other Assets |
| 952 |
| 946 |
|
|
| 20,112 |
| 19,916 |
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
Notes payable |
| 506 |
| 297 |
|
Accounts payable |
| 891 |
| 902 |
|
Accrued interest |
| 245 |
| 227 |
|
Current portion of long-term debt |
| 616 |
| 517 |
|
Current portion of non-recourse debt of joint ventures |
| 70 |
| 75 |
|
Provision for loss on discontinued operations |
| 232 |
| 234 |
|
|
| 2,560 |
| 2,252 |
|
Deferred Amounts |
| 341 |
| 353 |
|
Long-Term Debt |
| 8,616 |
| 8,815 |
|
Future Income Taxes |
| 287 |
| 226 |
|
Non-Recourse Debt of Joint Ventures |
| 1,179 |
| 1,222 |
|
Junior Subordinated Debentures |
| 239 |
| 238 |
|
|
| 13,222 |
| 13,106 |
|
Shareholders’ Equity |
|
|
|
|
|
Preferred securities |
| 673 |
| 674 |
|
Preferred shares |
| 389 |
| 389 |
|
Common shares |
| 4,630 |
| 4,614 |
|
Contributed surplus |
| 266 |
| 265 |
|
Retained earnings |
| 933 |
| 854 |
|
Foreign exchange adjustment |
| (1 | ) | 14 |
|
|
| 6,890 |
| 6,810 |
|
|
| 20,112 |
| 19,916 |
|
See accompanying Notes to the Consolidated Financial Statements.
Consolidated Retained Earnings
Three months ended March 31 (unaudited) |
| 2003 |
| 2002 |
|
Balance at beginning of period |
| 854 |
| 586 |
|
Net income |
| 223 |
| 201 |
|
Preferred securities charges |
| (9 | ) | (9 | ) |
Preferred share dividends |
| (6 | ) | (5 | ) |
Common share dividends |
| (129 | ) | (119 | ) |
|
| 933 |
| 654 |
|
See accompanying Notes to the Consolidated Financial Statements.
Notes to Consolidated Financial Statements
(Unaudited)
1. Significant Accounting Policies
The consolidated financial statements of TransCanada PipeLines Limited (TransCanada or the company) have been prepared in accordance with Canadian generally accepted accounting principles. The accounting policies applied are consistent with those outlined in the company’s annual financial statements for the year ended December 31, 2002 except as stated below. These consolidated financial statements do not include all disclosures required in the annual financial statements and should be read in conjunction with the annual financial statements included in TransCanada’s 2002 Annual Report. Amounts are stated in Canadian dollars unless otherwise indicated. Certain comparative figures have been reclassified to conform with the current period’s presentation.
Since a determination of many assets, liabilities, revenues and expenses is dependent upon future events, the preparation of these consolidated financial statements requires the use of estimates and assumptions. In the opinion of Management, these consolidated financial statements have been properly prepared within reasonable limits of materiality and within the framework of the company’s significant accounting policies.
2. Segmented Information
Three months ended March 31 |
| Transmission |
| Power |
| Corporate |
| Total |
| ||||||||
| 2003 |
| 2002 |
| 2003 |
| 2002 |
| 2003 |
| 2002 |
| 2003 |
| 2002 |
| |
Revenues |
| 960 |
| 941 |
| 376 |
| 305 |
| — |
| — |
| 1,336 |
| 1,246 |
|
Cost of sales |
| — |
| — |
| (180 | ) | (133 | ) | — |
| — |
| (180 | ) | (133 | ) |
Other costs and expenses |
| (304 | ) | (260 | ) | (121 | ) | (92 | ) | (2 | ) | (2 | ) | (427 | ) | (354 | ) |
Depreciation |
| (194 | ) | (192 | ) | (21 | ) | (15 | ) | — |
| — |
| (215 | ) | (207 | ) |
Operating income/(loss) |
| 462 |
| 489 |
| 54 |
| 65 |
| (2 | ) | (2 | ) | 514 |
| 552 |
|
Financial and preferred equity charges |
| (196 | ) | (206 | ) | (2 | ) | (3 | ) | (21 | ) | (26 | ) | (219 | ) | (235 | ) |
Financial charges of joint ventures |
| (22 | ) | (23 | ) | — |
| — |
| — |
| — |
| (22 | ) | (23 | ) |
Equity income |
| 20 |
| 10 |
| 38 |
| — |
| — |
| — |
| 58 |
| 10 |
|
Interest and other income |
| 5 |
| 6 |
| 4 |
| 3 |
| 4 |
| 2 |
| 13 |
| 11 |
|
Income taxes |
| (111 | ) | (113 | ) | (31 | ) | (24 | ) | 6 |
| 9 |
| (136 | ) | (128 | ) |
Net Income Applicable to Common Shares |
| 158 |
| 163 |
| 63 |
| 41 |
| (13 | ) | (17 | ) | 208 |
| 187 |
|
Total Assets |
| March 31, 2003 |
| December 31, |
|
Transmission |
| 16,651 |
| 16,979 |
|
Power |
| 2,718 |
| 2,292 |
|
Corporate |
| 568 |
| 457 |
|
Continuing Operations |
| 19,937 |
| 19,728 |
|
Discontinued Operations |
| 175 |
| 188 |
|
|
| 20,112 |
| 19,916 |
|
3. Discontinued Operations
In July 2001, the Board of Directors approved a plan to dispose of the company’s Gas Marketing business. In December 1999, the Board of Directors approved a plan (December Plan) to dispose of the company’s International, Canadian Midstream and certain other businesses. The company’s disposals under both plans were substantially completed at December 31, 2001.
The company remains contingently liable pursuant to obligations under certain energy trading contracts that relate to the divested Gas Marketing business. At March 31, 2003, the provision for loss on discontinued operations, including approximately $100 million of deferred after-tax gains and remaining obligations related to the Gas Marketing business, was reviewed and was concluded to be appropriate.
Net income from discontinued operations for first quarter 2003 and first quarter 2002 was nil. The provision for loss on discontinued operations at March 31, 2003 was $232 million (December 31, 2002 - $234 million). The net assets of discontinued operations included in the consolidated balance sheet at March 31, 2003 were $76 million (December 31, 2002 - $90 million).
4. Contingencies
Actions have been brought on a class action basis against certain of the company’s subsidiaries and affiliates along with many other unrelated energy companies in both Washington and Oregon claiming injunctive relief and/or unspecified damages under the applicable unfair trading practices legislation of those states in connection with the sale and purchase of electricity in their respective jurisdictions. TransCanada considers the complaint to be without merit and will be vigorously defending it.
The action brought against TransCanada and similar actions brought against other unrelated energy companies by the California Attorney General, as disclosed in the December 31, 2002 audited financial statements, was dismissed by the U.S. Federal District Court in March 2003.
The company and its subsidiaries are subject to various other legal proceedings and actions arising in the normal course of business. While the final outcome of such legal proceedings and actions cannot be predicted with certainty, it is the opinion of management that their resolution will not have a material impact on the company’s consolidated financial position or results of operations.
5. Acquisition
On February 14, 2003, TransCanada completed the acquisition of a 31.6 per cent interest in Bruce Power L.P. for $376 million plus closing adjustments. TransCanada also loaned a one-third share ($75 million) of a $225 million accelerated deferred rent payment to Ontario Power Generation. Bruce Power L.P. is a tenant under a lease on the Bruce nuclear power facility in Ontario. The lease expires in 2018 with an option to extend the lease by up to 25 years.
Upon acquisition of Bruce Power L.P., the company, Cameco and BPC Generation Infrastructure Trust guaranteed on a several, pro-rata basis certain contingent financial obligations of Bruce Power L.P. related to operator licences, the lease agreement, power sales agreements and contractor services. TransCanada’s share of the net exposure under these guarantees at the time of closing was estimated to be approximately $260 million. The terms of the guarantees range from 2003 to 2018. The current carrying amount of the liability related to these guarantees is nil and the fair value is approximately $4 million.
Supplementary Information
As at March 31, 2003, TransCanada had 480,532,023 issued and outstanding common shares. In addition, there were 13,170,942 outstanding options to purchase common shares, of which 10,370,941 were exercisable as at March 31, 2003.
TransCanada welcomes questions from shareholders and potential investors. Please telephone:
Investor Relations, at 1-800-361-6522 (Canada and U.S. Mainland) or direct dial David Moneta/Debbie Persad at (403) 920-7911. The investor fax line is (403) 920-2457.
Media Relations: Glenn Herchak/Hejdi Feick at (403) 920-7877.
Visit TransCanada’s Internet site at: http://www.transcanada.com