Exhibit 13.2
Consolidated Income
(unaudited) |
| Three months ended September 30 |
| Nine months ended September 30 |
| ||||
(millions of dollars) |
| 2005 |
| 2004 |
| 2005 |
| 2004 |
|
|
|
|
|
|
|
|
|
|
|
Revenues |
| 1,491 |
| 1,307 |
| 4,342 |
| 4,007 |
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
Cost of sales |
| 290 |
| 215 |
| 800 |
| 706 |
|
Other costs and expenses |
| 466 |
| 379 |
| 1,310 |
| 1,152 |
|
Depreciation |
| 247 |
| 236 |
| 750 |
| 700 |
|
|
| 1,003 |
| 830 |
| 2,860 |
| 2,558 |
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
| 488 |
| 477 |
| 1,482 |
| 1,449 |
|
|
|
|
|
|
|
|
|
|
|
Other (Income)/Expenses |
|
|
|
|
|
|
|
|
|
Financial charges |
| 210 |
| 220 |
| 626 |
| 638 |
|
Financial charges of joint ventures |
| 14 |
| 15 |
| 46 |
| 45 |
|
Equity income |
| (105 | ) | (39 | ) | (163 | ) | (156 | ) |
Interest income and other |
| (22 | ) | (33 | ) | (50 | ) | (58 | ) |
Gain related to PipeLines LP |
| — |
| — |
| (82 | ) | — |
|
Gains related to Power LP |
| (245 | ) | — |
| (245 | ) | (197 | ) |
Gain related to Millennium |
| — |
| — |
| — |
| (7 | ) |
|
| (148 | ) | 163 |
| 132 |
| 265 |
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations before Income Taxes and Non-Controlling Interests |
| 636 |
| 314 |
| 1,350 |
| 1,184 |
|
|
|
|
|
|
|
|
|
|
|
Income Taxes |
|
|
|
|
|
|
|
|
|
Current |
| 189 |
| 99 |
| 429 |
| 329 |
|
Future |
| 12 |
| 17 |
| 38 |
| 38 |
|
|
| 201 |
| 116 |
| 467 |
| 367 |
|
|
|
|
|
|
|
|
|
|
|
Non-Controlling Interests |
| 1 |
| — |
| 7 |
| 6 |
|
Net Income from Continuing Operations |
| 434 |
| 198 |
| 876 |
| 811 |
|
Net Income from Discontinued Operations |
| — |
| 52 |
| — |
| 52 |
|
Net Income |
| 434 |
| 250 |
| 876 |
| 863 |
|
|
|
|
|
|
|
|
|
|
|
Preferred Share Dividends |
| 6 |
| 6 |
| 17 |
| 17 |
|
Net Income Applicable to Common Shares |
| 428 |
| 244 |
| 859 |
| 846 |
|
|
|
|
|
|
|
|
|
|
|
Net Income Applicable to Common Shares |
|
|
|
|
|
|
|
|
|
Continuing operations |
| 428 |
| 192 |
| 859 |
| 794 |
|
Discontinued operations |
| — |
| 52 |
| — |
| 52 |
|
|
| 428 |
| 244 |
| 859 |
| 846 |
|
See accompanying notes to the consolidated financial statements.
1
Consolidated Cash Flows
(unaudited) |
| Three months ended September 30 |
| Nine months ended September 30 |
| ||||
(millions of dollars) |
| 2005 |
| 2004 |
| 2005 |
| 2004 |
|
|
|
|
|
|
|
|
|
|
|
Cash Generated From Operations |
|
|
|
|
|
|
|
|
|
Net income from continuing operations |
| 434 |
| 198 |
| 876 |
| 811 |
|
Depreciation |
| 247 |
| 236 |
| 750 |
| 700 |
|
Gain related to PipeLines LP, net of current tax expense (Note 5) |
| — |
| — |
| (31 | ) | — |
|
Gains related to Power LP, net of current tax expense (Note 5) |
| (166 | ) | — |
| (166 | ) | (197 | ) |
Gain related to Millennium, net of current tax expense |
| — |
| — |
| — |
| (7 | ) |
Equity income in excess of distributions received |
| (52 | ) | (29 | ) | (78 | ) | (119 | ) |
Pension funding lower than/(in excess of) expense |
| 12 |
| (22 | ) | (5 | ) | (21 | ) |
Future income taxes |
| 12 |
| 17 |
| 38 |
| 38 |
|
Non-controlling interests |
| 1 |
| — |
| 7 |
| 6 |
|
Other |
| 2 |
| (14 | ) | (16 | ) | (28 | ) |
Funds generated from operations |
| 490 |
| 386 |
| 1,375 |
| 1,183 |
|
Decrease/(increase) in operating working capital |
| 89 |
| 133 |
| (129 | ) | 51 |
|
Net cash provided by operations |
| 579 |
| 519 |
| 1,246 |
| 1,234 |
|
|
|
|
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
|
|
|
|
Capital expenditures |
| (166 | ) | (97 | ) | (409 | ) | (291 | ) |
Acquisitions, net of cash acquired |
| — |
| (49 | ) | (632 | ) | (63 | ) |
Disposition of assets |
| 523 |
| — |
| 676 |
| 408 |
|
Deferred amounts and other |
| (44 | ) | (11 | ) | (97 | ) | (27 | ) |
Net cash provided by/(used in) investing activities |
| 313 |
| (157 | ) | (462 | ) | 27 |
|
|
|
|
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
|
|
|
|
Dividends |
| (154 | ) | (152 | ) | (454 | ) | (442 | ) |
Advances from parent |
| — |
| — |
| (75 | ) | — |
|
Notes payable repaid, net |
| (696 | ) | (66 | ) | (163 | ) | (367 | ) |
Long-term debt issued |
| — |
| — |
| 799 |
| 665 |
|
Reduction of long-term debt |
| (5 | ) | (9 | ) | (941 | ) | (510 | ) |
Non-recourse debt of joint ventures issued |
| 4 |
| 60 |
| 9 |
| 147 |
|
Reduction of non-recourse debt of joint ventures |
| (9 | ) | (8 | ) | (30 | ) | (20 | ) |
Partnership units of joint ventures issued |
| — |
| — |
| — |
| 88 |
|
Common shares issued |
| — |
| — |
| 80 |
| — |
|
Net cash used in financing activities |
| (860 | ) | (175 | ) | (775 | ) | (439 | ) |
|
|
|
|
|
|
|
|
|
|
Effect of Foreign Exchange Rate Changes on Cash and Short-Term Investments |
| (12 | ) | (58 | ) | 10 |
| (55 | ) |
|
|
|
|
|
|
|
|
|
|
Increase in Cash and Short-Term Investments |
| 20 |
| 129 |
| 19 |
| 767 |
|
|
|
|
|
|
|
|
|
|
|
Cash and Short-Term Investments |
|
|
|
|
|
|
|
|
|
Beginning of period |
| 186 |
| 975 |
| 187 |
| 337 |
|
|
|
|
|
|
|
|
|
|
|
Cash and Short-Term Investments |
|
|
|
|
|
|
|
|
|
End of period |
| 206 |
| 1,104 |
| 206 |
| 1,104 |
|
|
|
|
|
|
|
|
|
|
|
Supplementary Cash Flow Information |
|
|
|
|
|
|
|
|
|
Income taxes paid |
| 101 |
| 77 |
| 408 |
| 329 |
|
Interest paid |
| 214 |
| 193 |
| 642 |
| 586 |
|
See accompanying notes to the consolidated financial statements.
2
Consolidated Balance Sheet
(millions of dollars) |
| September 30, 2005 |
| December 31, |
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
Current Assets |
|
|
|
|
|
Cash and short-term investments |
| 206 |
| 187 |
|
Accounts receivable |
| 574 |
| 627 |
|
Inventories |
| 241 |
| 174 |
|
Other |
| 302 |
| 120 |
|
|
| 1,323 |
| 1,108 |
|
Long-Term Investments |
| 850 |
| 840 |
|
Plant, Property and Equipment |
| 18,566 |
| 18,704 |
|
Other Assets |
| 1,378 |
| 1,459 |
|
|
| 22,117 |
| 22,111 |
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
Notes payable |
| 383 |
| 546 |
|
Accounts payable |
| 1,171 |
| 1,215 |
|
Accrued interest |
| 222 |
| 214 |
|
Current portion of long-term debt |
| 379 |
| 766 |
|
Current portion of non-recourse debt of joint ventures |
| 71 |
| 83 |
|
|
| 2,226 |
| 2,824 |
|
Deferred Amounts |
| 962 |
| 783 |
|
Long-Term Debt |
| 9,781 |
| 9,713 |
|
Future Income Taxes |
| 571 |
| 509 |
|
Non-Recourse Debt of Joint Ventures |
| 626 |
| 779 |
|
Preferred Securities |
| 534 |
| 554 |
|
|
| 14,700 |
| 15,162 |
|
|
|
|
|
|
|
Non-Controlling Interests |
| 74 |
| 76 |
|
|
|
|
|
|
|
Shareholders’ Equity |
|
|
|
|
|
Preferred shares |
| 389 |
| 389 |
|
Common shares |
| 4,712 |
| 4,632 |
|
Contributed surplus |
| 273 |
| 270 |
|
Retained earnings |
| 2,067 |
| 1,653 |
|
Foreign exchange adjustment |
| (98 | ) | (71 | ) |
|
| 7,343 |
| 6,873 |
|
|
| 22,117 |
| 22,111 |
|
See accompanying notes to the consolidated financial statements.
3
Consolidated Retained Earnings
(unaudited) |
| Nine months ended September 30 |
| ||
2005 |
| 2004 | |||
|
|
|
|
|
|
Balance at beginning of period |
| 1,653 |
| 1,185 |
|
Net income |
| 876 |
| 863 |
|
Preferred share dividends |
| (17 | ) | (17 | ) |
Common share dividends |
| (445 | ) | (421 | ) |
|
| 2,067 |
| 1,610 |
|
See accompanying notes to the consolidated financial statements.
4
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 restated audited consolidated financial statements for the year ended December 31, 2004 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 restated 2004 audited consolidated financial statements. 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 Change
Financial Instruments – Disclosure and Presentation
Effective January 1, 2005, the company adopted the provisions of the Canadian Institute of Chartered Accountants amendment to the existing Handbook Section “Financial Instruments – Disclosure and Presentation” which provides guidance for classifying certain financial instruments that embody obligations that may be settled by issuance of the issuer’s equity shares as debt when the instrument does not establish an ownership relationship. In accordance with this amendment, TCPL reclassified the non-controlling interest component of preferred securities as long-term debt.
This accounting change was applied retroactively with restatement of prior periods. The impact of this change on TCPL’s net income in third quarter 2005 and prior periods was nil.
5
The impact of the accounting change on the company’s consolidated balance sheet as at December 31, 2004 is as follows.
(unaudited - millions of dollars) |
| Increase/(Decrease) |
|
Deferred Amounts (1) |
| 135 |
|
Preferred Securities |
| 535 |
|
Non-Controlling Interest |
|
|
|
Preferred securities of subsidiary |
| (670 | ) |
Total Liabilities and Shareholders’ Equity |
| — |
|
(1) Regulatory deferral
3. Segmented Information
Three months ended September 30 |
| Gas Transmission |
| Power |
| Corporate |
| Total |
| ||||||||
(unaudited - millions of dollars) |
| 2005 |
| 2004 |
| 2005 |
| 2004 |
| 2005 |
| 2004 |
| 2005 |
| 2004 |
|
Revenues |
| 1,039 |
| 945 |
| 452 |
| 362 |
| — |
| — |
| 1,491 |
| 1,307 |
|
Cost of sales |
| — |
| — |
| (290 | ) | (215 | ) | — |
| — |
| (290 | ) | (215 | ) |
Other costs and expenses |
| (358 | ) | (293 | ) | (107 | ) | (86 | ) | (1 | ) | — |
| (466 | ) | (379 | ) |
Depreciation |
| (236 | ) | (218 | ) | (11 | ) | (18 | ) | — |
| — |
| (247 | ) | (236 | ) |
Operating income/(loss) |
| 445 |
| 434 |
| 44 |
| 43 |
| (1 | ) | — |
| 488 |
| 477 |
|
Financial charges and non-controlling interests |
| (183 | ) | (198 | ) | — |
| (3 | ) | (34 | ) | (25 | ) | (217 | ) | (226 | ) |
Financial charges of joint ventures |
| (14 | ) | (14 | ) | — |
| (1 | ) | — |
| — |
| (14 | ) | (15 | ) |
Equity income |
| 6 |
| 10 |
| 99 |
| 29 |
| — |
| — |
| 105 |
| 39 |
|
Interest income and other |
| 8 |
| 1 |
| 2 |
| 6 |
| 12 |
| 26 |
| 22 |
| 33 |
|
Gains related to Power LP |
| — |
| — |
| 245 |
| — |
| — |
| — |
| 245 |
| — |
|
Income taxes |
| (114 | ) | (99 | ) | (98 | ) | (23 | ) | 11 |
| 6 |
| (201 | ) | (116 | ) |
Continuing Operations |
| 148 |
| 134 |
| 292 |
| 51 |
| (12 | ) | 7 |
| 428 |
| 192 |
|
Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
|
|
| — |
| 52 |
|
Net Income Applicable to Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
| 428 |
| 244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30 |
| Gas Transmission |
| Power |
| Corporate |
| Total |
| ||||||||
(unaudited - millions of dollars) |
| 2005 |
| 2004 |
| 2005 |
| 2004 |
| 2005 |
| 2004 |
| 2005 |
| 2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
| 3,066 |
| 2,842 |
| 1,276 |
| 1,165 |
| — |
| — |
| 4,342 |
| 4,007 |
|
Cost of sales |
| — |
| — |
| (800 | ) | (706 | ) | — |
| — |
| (800 | ) | (706 | ) |
Other costs and expenses |
| (988 | ) | (876 | ) | (318 | ) | (273 | ) | (4 | ) | (3 | ) | (1,310 | ) | (1,152 | ) |
Depreciation |
| (701 | ) | (645 | ) | (49 | ) | (55 | ) |
|
| — |
| (750 | ) | (700 | ) |
Operating income/(loss) |
| 1,377 |
| 1,321 |
| 109 |
| 131 |
| (4 | ) | (3 | ) | 1,482 |
| 1,449 |
|
Financial charges and non-controlling interests |
| (552 | ) | (587 | ) | (2 | ) | (7 | ) | (96 | ) | (67 | ) | (650 | ) | (661 | ) |
Financial charges of joint ventures |
| (41 | ) | (43 | ) | (5 | ) | (2 | ) | — |
| — |
| (46 | ) | (45 | ) |
Equity income |
| 21 |
| 31 |
| 142 |
| 125 |
| — |
| — |
| 163 |
| 156 |
|
Interest income and other |
| 21 |
| 6 |
| 5 |
| 11 |
| 24 |
| 41 |
| 50 |
| 58 |
|
Gain related to PipeLines LP |
| 82 |
| — |
| — |
| — |
| — |
| — |
| 82 |
| — |
|
Gains related to Power LP |
| — |
| — |
| 245 |
| 197 |
| — |
| — |
| 245 |
| 197 |
|
Gain related to Millennium |
| — |
| 7 |
| — |
| — |
| — |
| — |
| — |
| 7 |
|
Income taxes |
| (384 | ) | (306 | ) | (130 | ) | (90 | ) | 47 |
| 29 |
| (467 | ) | (367 | ) |
Continuing Operations |
| 524 |
| 429 |
| 364 |
| 365 |
| (29 | ) | — |
| 859 |
| 794 |
|
Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
|
|
| — |
| 52 |
|
Net Income Applicable to Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
| 859 |
| 846 |
|
6
Total Assets
(millions of dollars) |
| September 30, 2005 |
| December 31, |
|
Gas Transmission |
| 17,781 |
| 18,410 |
|
Power |
| 3,427 |
| 2,802 |
|
Corporate |
| 909 |
| 899 |
|
|
| 22,117 |
| 22,111 |
|
4. Risk Management and Financial Instruments
The following represents the material changes to the company’s financial instruments since December 31, 2004.
Energy Price Risk Management
The company executes power, natural gas and heat rate derivatives for overall management of its asset portfolio. Heat rate contracts are contracts for the sale or purchase of power that are priced based on a natural gas index. The fair values and notional volumes of the swap, option, future and heat rate contracts are shown in the tables below. In accordance with the company’s accounting policy, each of the derivatives in the table below is recorded on the balance sheet at its fair value at September 30, 2005 and December 31, 2004.
Power
|
|
|
| September 30, 2005 |
| December 31, 2004 |
|
Asset/(Liability) |
| Accounting |
| Fair |
| Fair |
|
(millions of dollars) |
| Treatment |
| Value |
| Value |
|
|
|
|
|
|
|
|
|
Power - swaps |
|
|
|
|
|
|
|
(maturing 2005 to 2011) |
| Hedge |
| (123 | ) | 7 |
|
(maturing 2005 to 2010) |
| Non-hedge |
| 19 |
| (2 | ) |
Gas - swaps, futures and options |
|
|
|
|
|
|
|
(maturing 2005 to 2016) |
| Hedge |
| (13 | ) | (39 | ) |
(maturing 2005 to 2008) |
| Non-hedge |
| (16 | ) | (2 | ) |
Heat rate contracts |
|
|
|
|
|
|
|
(maturing 2005 to 2006) |
| Hedge |
| — |
| (1 | ) |
7
Notional Volumes |
|
|
|
|
|
|
| ||||
September 30, 2005 |
| Accounting |
| Power (GWh) |
| Gas (Bcf) |
| ||||
(unaudited) |
| Treatment |
| Purchases |
| Sales |
| Purchases |
| Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
Power - swaps |
|
|
|
|
|
|
|
|
|
|
|
(maturing 2005 to 2011) |
| Hedge |
| 911 |
| 6,366 |
| — |
| — |
|
(maturing 2005 to 2010) |
| Non-hedge |
| 1,206 |
| 220 |
| — |
| — |
|
Gas - swaps, futures and options |
|
|
|
|
|
|
|
|
|
|
|
(maturing 2005 to 2016) |
| Hedge |
| — |
| — |
| 80 |
| 71 |
|
(maturing 2005 to 2008) |
| Non-hedge |
| — |
| — |
| 26 |
| 21 |
|
Heat rate contracts |
|
|
|
|
|
|
|
|
|
|
|
(maturing 2005 to 2006) |
| Hedge |
| — |
| 44 |
| — |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional Volumes |
| Accounting |
| Power (GWh) |
| Gas (Bcf) |
| ||||
December 31, 2004 |
| Treatment |
| Purchases |
| Sales |
| Purchases |
| Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
Power - swaps |
| Hedge |
| 3,314 |
| 7,029 |
| — |
| — |
|
|
| Non-hedge |
| 438 |
| — |
| — |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas - swaps, futures and options |
| Hedge |
| — |
| — |
| 80 |
| 84 |
|
|
| Non-hedge |
| — |
| — |
| 5 |
| 8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Heat rate contracts |
| Hedge |
| — |
| 229 |
| 2 |
| — |
|
5. Dispositions
PipeLines LP
In March and April 2005, TCPL sold 3,547,200 common units of TC PipeLines, LP (PipeLines LP) for net proceeds to the company of approximately $153 million and an after-tax gain of $49 million. The net gain was recorded in the Gas Transmission segment and the company recorded a $33 million tax charge, including $51 million of current income tax expense, on this transaction. Subsequent to these transactions, TCPL continues to own a 13.4 per cent interest in PipeLines LP represented by the general partner interest of 2.0 per cent as well as an 11.4 per cent limited partner interest.
Power LP
On August 31, 2005, TCPL closed the sale of its interest in TransCanada Power, L.P. (Power LP) to EPCOR for net proceeds of $523 million. In third quarter 2005, TCPL realized an after-tax gain of $193 million from this sale. The net gain was recorded in the Power segment and the company recorded a $52 million tax charge,
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including $79 million of current income tax expense, on this transaction. EPCOR’s acquisition includes 14.5 million limited partnership units of Power LP, representing 30.6 per cent of the outstanding units; 100 per cent ownership of the General Partner of Power LP; and the management and operations agreements governing the ongoing operation of Power LP’s generation assets. Following the close of the transaction, the name of the partnership changed from TransCanada Power, L.P. to EPCOR Power L.P. (the Partnership).
Effective upon the closing of the sale, TCPL was no longer the general partner of the Partnership and TCPL and its affiliates ceased to own Partnership units. In addition, approximately 100 TCPL employees, who provided management, operations and maintenance services under the contract to the Partnership, became EPCOR employees.
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 nine months ended September 30 is as follows.
Three months ended September 30, 2005 |
| Pension Benefit Plans |
| Other Benefit Plans |
| ||||
(unaudited - millions of dollars) |
| 2005 |
| 2004 |
| 2005 |
| 2004 |
|
Current service cost |
| 7 |
| 7 |
| — |
| 1 |
|
Interest cost |
| 16 |
| 14 |
| 1 |
| 1 |
|
Expected return on plan assets |
| (16 | ) | (14 | ) | — |
| — |
|
Amortization of transitional obligation related to regulated business |
| — |
| — |
| 1 |
| 1 |
|
Amortization of net actuarial loss |
| 5 |
| 3 |
| — |
| 1 |
|
Amortization of past service costs |
| 1 |
| 1 |
| — |
| — |
|
Net benefit cost recognized |
| 13 |
| 11 |
| 2 |
| 4 |
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2005 |
| Pension Benefit Plans |
| Other Benefit Plans |
| ||||
(unaudited - millions of dollars) |
| 2005 |
| 2004 |
| 2005 |
| 2004 |
|
Current service cost |
| 22 |
| 21 |
| 1 |
| 2 |
|
Interest cost |
| 48 |
| 42 |
| 4 |
| 4 |
|
Expected return on plan assets |
| (48 | ) | (41 | ) | — |
| — |
|
Amortization of transitional obligation related to regulated business |
| — |
| — |
| 2 |
| 2 |
|
Amortization of net actuarial loss |
| 13 |
| 9 |
| 1 |
| 2 |
|
Amortization of past service costs |
| 2 |
| 2 |
| — |
| — |
|
Net benefit cost recognized |
| 37 |
| 33 |
| 8 |
| 10 |
|
7. Subsequent Events
Bruce Power L.P.
On October 17, 2005, TCPL announced that Bruce Power L.P. (Bruce Power) and the Ontario Power Authority (OPA), entered into a long-term agreement whereby Bruce Power will refurbish and restart the
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currently idle Units 1 and 2, extend the operating life of Unit 3 by replacing its steam generators and fuel channels when required and replace the steam generators on Unit 4. Bruce Power’s capital program for the restart and refurbishment work is expected to total approximately $4.25 billion and TCPL’s approximate $2.125 billion share will be financed through capital contributions over the period from 2005 to 2011. As a result of the agreement between Bruce Power and the OPA, and Cameco Corporation’s decision not to participate in the restart and refurbishment program, a new partnership has been created.
The new Bruce Power A Limited Partnership (BALP) will sublease the Bruce A facilities, which are comprised of Units 1 to 4, from Bruce Power. The effect of these transactions is that TCPL and BPC Generation Infrastructure Trust each incurred a net cash outlay of approximately $100 million and each owns a 47.4 per cent interest in BALP. The remaining 5.2 per cent is owned by the Power Worker’s Union and The Society of Energy Professionals. The day-to-day operations of the Bruce facility will be unaffected by the formation of BALP and TCPL continues to own 31.6 per cent of the Bruce B facilities (Units 5 to 8). As a result of reorganizing Bruce Power, TCPL expects to proportionately consolidate its investment in both Bruce Power and BALP, on a prospective basis from closing. The agreement and above transactions were completed October 31, 2005 with the receipt of a favourable tax ruling from the Canada Revenue Agency.
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 at (403) 920-7911. The investor fax line is (403) 920-2457. Media Relations: Kurt Kadatz/Jennifer Varey at (403) 920-7859
Visit TCPL’s Internet site at: http://www.transcanada.com
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