Exhibit 13.2
Consolidated Income
Three months ended March 31 (unaudited) |
|
|
|
|
|
(millions of dollars) |
| 2006 |
| 2005 |
|
|
|
|
|
|
|
Revenues |
| 1,894 |
| 1,410 |
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
Cost of sales |
| 505 |
| 265 |
|
Other costs and expenses |
| 537 |
| 422 |
|
Depreciation |
| 257 |
| 251 |
|
|
| 1,299 |
| 938 |
|
|
|
|
|
|
|
Operating Income |
| 595 |
| 472 |
|
|
|
|
|
|
|
Other Expenses/(Income) |
|
|
|
|
|
Financial charges |
| 203 |
| 208 |
|
Financial charges of joint ventures |
| 21 |
| 16 |
|
Equity income |
| (18 | ) | (50 | ) |
Interest income and other |
| (49 | ) | (24 | ) |
Gain on sale of PipeLines LP units |
| — |
| (80 | ) |
|
| 157 |
| 70 |
|
|
|
|
|
|
|
Income from Continuing Operations before Income Taxes and Non-Controlling Interests |
| 438 |
| 402 |
|
|
|
|
|
|
|
Income Taxes |
|
|
|
|
|
Current |
| 210 |
| 161 |
|
Future |
| (41 | ) | (12 | ) |
|
| 169 |
| 149 |
|
|
|
|
|
|
|
Non-Controlling Interests |
|
|
|
|
|
Non-controlling interest in PipeLines LP |
| 13 |
| 9 |
|
Other |
| 6 |
| 6 |
|
|
| 19 |
| 15 |
|
|
|
|
|
|
|
Net Income from Continuing Operations |
| 250 |
| 238 |
|
Net Income from Discontinued Operations (Note 5) |
| 28 |
| — |
|
Net Income |
| 278 |
| 238 |
|
|
|
|
|
|
|
Preferred Share Dividends |
| 6 |
| 6 |
|
Net Income Applicable to Common Shares |
| 272 |
| 232 |
|
|
|
|
|
|
|
Net Income Applicable to Common Shares |
|
|
|
|
|
Continuing operations |
| 244 |
| 232 |
|
Discontinued operations |
| 28 |
| — |
|
|
| 272 |
| 232 |
|
See accompanying notes to the consolidated financial statements.
1
Consolidated Cash Flows
Three months ended March 31 (unaudited) |
|
|
|
|
|
(millions of dollars) |
| 2006 |
| 2005 |
|
|
|
|
|
|
|
Cash Generated from Operations |
|
|
|
|
|
Net income from continuing operations |
| 250 |
| 238 |
|
Depreciation |
| 257 |
| 251 |
|
Gain on sale of PipeLines LP units, net of current income tax |
| — |
| (30 | ) |
Equity income in excess of distributions received |
| (4 | ) | (31 | ) |
Future income taxes |
| (41 | ) | (12 | ) |
Non-controlling interests |
| 19 |
| 15 |
|
Funding of employee future benefits in excess of expense |
| (2 | ) | (7 | ) |
Other |
| 37 |
| (4 | ) |
Funds generated from operations |
| 516 |
| 420 |
|
Increase in operating working capital |
| (1 | ) | (86 | ) |
Net cash provided by operations |
| 515 |
| 334 |
|
|
|
|
|
|
|
Investing Activities |
|
|
|
|
|
Capital expenditures |
| (303 | ) | (108 | ) |
Disposition of assets, net of current income tax |
| — |
| 101 |
|
Deferred amounts and other |
| (15 | ) | 40 |
|
Net cash (used in)/provided by investing activities |
| (318 | ) | 33 |
|
|
|
|
|
|
|
Financing Activities |
|
|
|
|
|
Dividends |
| (149 | ) | (146 | ) |
Advances from parent |
| — |
| (75 | ) |
Distributions paid to non-controlling interests |
| (10 | ) | (9 | ) |
Notes payable (repaid)/issued, net |
| (633 | ) | 244 |
|
Long-term debt issued |
| 878 |
| 300 |
|
Reduction of long-term debt |
| (140 | ) | (329 | ) |
Long-term debt of joint ventures issued |
| 2 |
| 5 |
|
Reduction of long-term debt of joint ventures |
| (6 | ) | (4 | ) |
Common shares issued |
| — |
| 80 |
|
Net cash (used in)/provided by financing activities |
| (58 | ) | 66 |
|
|
|
|
|
|
|
Effect of Foreign Exchange Rate Changes on Cash and Short-Term Investments |
| 2 |
| 2 |
|
|
|
|
|
|
|
Increase in Cash and Short-Term Investments |
| 141 |
| 435 |
|
|
|
|
|
|
|
Cash and Short-Term Investments |
|
|
|
|
|
Beginning of period |
| 212 |
| 190 |
|
|
|
|
|
|
|
Cash and Short-Term Investments |
|
|
|
|
|
End of period |
| 353 |
| 625 |
|
|
|
|
|
|
|
Supplementary Cash Flow Information |
|
|
|
|
|
Income taxes paid |
| 217 |
| 191 |
|
Interest paid |
| 199 |
| 196 |
|
See accompanying notes to the consolidated financial statements.
2
Consolidated Balance Sheet
|
|
|
| December 31, |
|
(millions of dollars) |
| March 31, 2006 |
| 2005 |
|
|
| (unaudited) |
|
|
|
ASSETS |
|
|
|
|
|
Current Assets |
|
|
|
|
|
Cash and short-term investments |
| 353 |
| 212 |
|
Accounts receivable |
| 700 |
| 796 |
|
Inventories |
| 219 |
| 281 |
|
Other |
| 281 |
| 277 |
|
|
| 1,553 |
| 1,566 |
|
Long-Term Investments |
| 419 |
| 400 |
|
Plant, Property and Equipment |
| 20,090 |
| 20,038 |
|
Other Assets |
| 2,049 |
| 2,109 |
|
|
| 24,111 |
| 24,113 |
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
Notes payable |
| 329 |
| 962 |
|
Accounts payable |
| 1,383 |
| 1,536 |
|
Accrued interest |
| 231 |
| 222 |
|
Current portion of long-term debt |
| 533 |
| 393 |
|
Current portion of long-term debt of joint ventures |
| 37 |
| 41 |
|
|
| 2,513 |
| 3,154 |
|
Deferred Amounts |
| 1,149 |
| 1,196 |
|
Future Income Taxes |
| 661 |
| 703 |
|
Long-Term Debt |
| 10,249 |
| 9,640 |
|
Long-Term Debt of Joint Ventures |
| 935 |
| 937 |
|
Preferred Securities |
| 537 |
| 536 |
|
|
| 16,044 |
| 16,166 |
|
Non-Controlling Interests |
|
|
|
|
|
Non-controlling interest in PipeLines LP |
| 320 |
| 318 |
|
Other |
| 82 |
| 76 |
|
|
| 402 |
| 394 |
|
Shareholders’ Equity |
|
|
|
|
|
Preferred shares |
| 389 |
| 389 |
|
Common shares |
| 4,712 |
| 4,712 |
|
Contributed surplus |
| 275 |
| 275 |
|
Retained earnings |
| 2,383 |
| 2,267 |
|
Foreign exchange adjustment |
| (94 | ) | (90 | ) |
|
| 7,665 |
| 7,553 |
|
|
| 24,111 |
| 24,113 |
|
See accompanying notes to the consolidated financial statements.
3
Consolidated Retained Earnings
Three months ended March 31 (unaudited) |
|
|
|
|
|
(millions of dollars) |
| 2006 |
| 2005 |
|
Balance at beginning of period |
| 2,267 |
| 1,653 |
|
Net income |
| 278 |
| 238 |
|
Preferred share dividends |
| (6 | ) | (6 | ) |
Common share dividends |
| (156 | ) | (148 | ) |
|
|
|
|
|
|
|
| 2,383 |
| 1,737 |
|
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 annual audited consolidated financial statements for the year ended December 31, 2005. 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 2005 audited consolidated financial statements included in TCPL’s 2005 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 |
| Gas Transmission |
| Power |
| Corporate |
| Total |
| ||||||||
(unaudited - millions of dollars) |
| 2006 |
| 2005 |
| 2006 |
| 2005 |
| 2006 |
| 2005 |
| 2006 |
| 2005 |
|
Revenues |
| 1,088 |
| 998 |
| 806 |
| 412 |
| — |
| — |
| 1,894 |
| 1,410 |
|
Cost of sales |
| (70 | ) | — |
| (435 | ) | (265 | ) | — |
| — |
| (505 | ) | (265 | ) |
Other costs and expenses |
| (340 | ) | (307 | ) | (196 | ) | (113 | ) | (1 | ) | (2 | ) | (537 | ) | (422 | ) |
Depreciation |
| (227 | ) | (233 | ) | (30 | ) | (18 | ) | — |
| — |
| (257 | ) | (251 | ) |
Operating income/(loss) |
| 451 |
| 458 |
| 145 |
| 16 |
| (1 | ) | (2 | ) | 595 |
| 472 |
|
Financial charges and non-controlling interests |
| (192 | ) | (197 | ) | — |
| (2 | ) | (36 | ) | (30 | ) | (228 | ) | (229 | ) |
Financial charges of joint ventures |
| (14 | ) | (14 | ) | (7 | ) | (2 | ) | — |
| — |
| (21 | ) | (16 | ) |
Equity income |
| 18 |
| 20 |
| — |
| 30 |
| — |
| — |
| 18 |
| 50 |
|
Interest income and other |
| 32 |
| 14 |
| 2 |
| 3 |
| 15 |
| 7 |
| 49 |
| 24 |
|
Gain on sale of PipeLines LP units |
| — |
| 80 |
| — |
| — |
| — |
| — |
| — |
| 80 |
|
Income taxes |
| (127 | ) | (150 | ) | (51 | ) | (15 | ) | 9 |
| 16 |
| (169 | ) | (149 | ) |
Continuing Operations |
| 168 |
| 211 |
| 89 |
| 30 |
| (13 | ) | (9 | ) | 244 |
| 232 |
|
Discontinued Operations |
|
|
|
|
|
|
|
|
|
|
|
|
| 28 |
| — |
|
Net Income Applicable to Common Shares |
|
|
|
|
|
|
|
|
|
|
|
|
| 272 |
| 232 |
|
5
Total Assets
|
|
|
| December 31, |
|
(millions of dollars) |
| March 31, 2006 |
| 2005 |
|
|
| (unaudited) |
|
|
|
Gas Transmission |
| 18,077 |
| 18,252 |
|
Power |
| 4,920 |
| 4,923 |
|
Corporate |
| 1,114 |
| 938 |
|
|
| 24,111 |
| 24,113 |
|
6
3. Risk Management and Financial Instruments
The following represents the material changes to the company’s financial instruments since December 31, 2005.
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 value and notional volumes of contracts for differences and the swap, future, option and heat rate contracts are shown in the tables below.
Power
|
|
|
| March 31, 2006 |
| December 31, 2005 |
|
|
|
|
| (unaudited) |
|
|
|
Asset/(Liability) |
| Accounting |
| Fair |
| Fair |
|
(millions of dollars) |
| Treatment |
| Value |
| Value |
|
|
|
|
|
|
|
|
|
Power - swaps and contracts for differences |
|
|
|
|
|
|
|
(maturing 2006 to 2011) |
| Hedge |
| (77 | ) | (130 | ) |
(maturing 2006 to 2010) |
| Non-hedge |
| 6 |
| 13 |
|
Gas - swaps, futures and options |
|
|
|
|
|
|
|
(maturing 2006 to 2016) |
| Hedge |
| (20 | ) | 17 |
|
(maturing 2006 to 2008) |
| Non-hedge |
| 5 |
| (11 | ) |
Heat rate contracts |
|
|
|
|
|
|
|
(maturing 2006) |
| Non-hedge |
| — |
| — |
|
7
Notional Volumes |
|
|
|
|
|
|
|
|
| ||
March 31, 2006 |
| Accounting |
| Power (GWh) |
| Gas (Bcf) |
| ||||
(unaudited) |
| Treatment |
| Purchases |
| Sales |
| Purchases |
| Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
Power - swaps and contracts for differences |
|
|
|
|
|
|
|
|
|
|
|
(maturing 2006 to 2011) |
| Hedge |
| 2,572 |
| 8,899 |
| — |
| — |
|
(maturing 2006 to 2010) |
| Non-hedge |
| 1,365 |
| 1,035 |
| — |
| — |
|
Gas - swaps, futures and options |
|
|
|
|
|
|
|
|
|
|
|
(maturing 2006 to 2016) |
| Hedge |
| — |
| — |
| 91 |
| 63 |
|
(maturing 2006 to 2008) |
| Non-hedge |
| — |
| — |
| 17 |
| 20 |
|
Heat rate contracts |
|
|
|
|
|
|
|
|
|
|
|
(maturing 2006) |
| Non-hedge |
| — |
| 26 |
| — |
| — |
|
Notional Volumes |
| Accounting |
| Power (GWh) |
| Gas (Bcf) |
| ||||
December 31, 2005 |
| Treatment |
| Purchases |
| Sales |
| Purchases |
| Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
Power - swaps and contracts for differences |
| Hedge |
| 2,566 |
| 7,780 |
| — |
| — |
|
|
| Non-hedge |
| 1,332 |
| 456 |
| — |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas - swaps, futures and options |
| Hedge |
| — |
| — |
| 91 |
| 69 |
|
|
| Non-hedge |
| — |
| — |
| 15 |
| 18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Heat rate contracts |
| Non-hedge |
| — |
| 35 |
| — |
| — |
|
8
4. Long-Term Debt
In January 2006, the company issued $300 million of 4.3 per cent medium-term notes due 2011 and in March 2006, the company issued US$500 million of 5.85 per cent senior unsecured notes due 2036.
5. Discontinued Operations
TCPL’s net income includes $28 million of net income from discontinued operations, reflecting settlements received in first quarter 2006 from bankruptcy claims related to the Gas Marketing business divested in 2001.
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 months ended March 31 is as follows.
Three months ended March 31 |
| Pension Benefit Plans |
| Other Benefit Plans |
| ||||
(unaudited - millions of dollars) |
| 2006 |
| 2005 |
| 2006 |
| 2005 |
|
Current service cost |
| 9 |
| 7 |
| — |
| — |
|
Interest cost |
| 17 |
| 16 |
| 2 |
| 1 |
|
Expected return on plan assets |
| (18 | ) | (16 | ) | — |
| — |
|
Amortization of transitional obligation related to regulated business |
| — |
| — |
| 1 |
| 1 |
|
Amortization of net actuarial loss |
| 7 |
| 4 |
| 1 |
| 1 |
|
Amortization of past service costs |
| 1 |
| 1 |
| — |
| — |
|
Net benefit cost recognized |
| 16 |
| 12 |
| 4 |
| 3 |
|
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/Myles Dougan at (403) 920-7911. The investor fax line is (403) 920-2457. Media Relations: Jennifer Varey at (403) 920-7859
Visit TCPL’s Internet site at: http://www.transcanada.com
9