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EXHIBIT 4
TRANSCANADA PIPELINES LIMITED
U.S. GAAP CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
CONDENSED STATEMENT OF CONSOLIDATED INCOME AND COMPREHENSIVE INCOME IN
ACCORDANCE WITH U.S. GAAP(1)
<Table>
<Caption>
Three months ended Year ended
December 31 December 31
---------------------------- ----------------------------
(MILLIONS OF DOLLARS) 2003 2002 2003 2002
- ----------------------------------------------------------------- -------------- ------------ ------------- --------------
Revenues(2) 1,227 1,178 4,919 4,565
-------------- ------------ ------------- --------------
Cost of sales(2) 127 127 592 441
Other costs and expenses 424 410 1,663 1,532
Depreciation 209 185 819 729
-------------- ------------ ------------- --------------
760 722 3,074 2,702
-------------- ------------ ------------- --------------
Operating income 467 456 1,845 1,863
Other (income)/expenses
Equity income(1)(3)(4) (49) (61) (334) (260)
Other expenses(4)(5)(6) 211 217 841 850
Income taxes 104 121 515 499
-------------- ------------ ------------- --------------
266 277 1,022 1,089
-------------- ------------ ------------- --------------
Income from continuing operations - U.S. GAAP 201 179 823 774
Net income from discontinued operations - U.S. GAAP - - 50 -
-------------- ------------ ------------- --------------
Income before cumulative effect of the application of
accounting changes in accordance with U.S. GAAP 201 179 873 774
Cumulative effect of the application of EITF 02-3, net of tax(2) - - (13) -
-------------- ------------ ------------- --------------
NET INCOME IN ACCORDANCE WITH U.S. GAAP 201 179 860 774
Adjustments affecting comprehensive income under U.S. GAAP
Foreign currency translation adjustment, net of tax(7) (11) - (54) 1
Additional minimum pension liability, net of tax(8) (11) (40) (2) (40)
Unrealized (loss)/gain on derivatives, net of tax(4) (6) - 8 (4)
-------------- ------------ ------------- --------------
COMPREHENSIVE INCOME IN ACCORDANCE WITH U.S. GAAP 173 139 812 731
============== ============ ============= ==============
</Table>
RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS
<Table>
<Caption>
Three months ended Year ended
December 31 December 31
--------------------------- ----------------------------
(MILLIONS OF DOLLARS) 2003 2002 2003 2002
- ----------------------------------------------------------------- ------------- ------------ ------------- --------------
Net income from continuing operations in accordance with
Canadian GAAP 208 195 859 805
U.S. GAAP adjustments
Preferred securities charges(5) (16) (15) (57) (58)
Tax impact of preferred securities charges 6 5 21 22
Unrealized (loss)/gain on foreign exchange and interest rate
derivatives(4) (3) (1) (9) 30
Tax impact of (loss)/gain on foreign exchange and interest
rate derivatives 1 - 3 (12)
Unrealized gain/(loss) on energy trading contracts(2) 14 (7) 28 (21)
Tax impact of unrealized gain/(loss) on energy trading
contracts (5) 2 (10) 8
Equity loss(3)(4) (6) - (18) -
Tax impact of equity loss 2 - 6 -
------------- ------------ ------------- --------------
Income from continuing operations in accordance with U.S. GAAP 201 179 823 774
============= ============ ============= ==============
</Table>
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CONDENSED BALANCE SHEET IN ACCORDANCE WITH U.S. GAAP(1)
<Table>
<Caption>
December 31, December 31,
(MILLIONS OF DOLLARS) 2003 2002
- ----------------------------------------------------------------------------------- ----------------
Current assets 1,017 1,079
Long-term energy trading assets(2) - 218
Long-term investments(3)(9) 1,760 1,683
Plant, property and equipment(10) 15,798 14,992
Regulatory asset(11) 2,721 2,578
Other assets(4) 1,192 884
----------------- ----------------
22,488 21,434
================= ================
Current liabilities(12) 2,117 2,006
Long-term energy trading liabilities(2) - 41
Deferred amounts(2)(4)(9)(10) 741 789
Long-term debt(4) 9,494 8,963
Deferred income taxes(11) 3,039 2,692
Preferred securities(13) 694 694
Trust originated preferred securities - 218
Non-controlling interests 82 -
Shareholders' equity 6,321 6,031
----------------- ----------------
22,488 21,434
================= ================
</Table>
STATEMENT OF OTHER COMPREHENSIVE INCOME IN ACCORDANCE WITH U.S. GAAP
<Table>
<Caption>
Cumulative Minimum Cash Flow
Translation Pension Liability Hedges
(MILLIONS OF DOLLARS) Account (SFAS No. 87) (SFAS No. 133) Total
------------------------------------------------------------------------- ----------------- ------------------ ----------
Balance at January 1, 2002 13 (56) (9) (52)
Additional minimum liability for employee future
benefits, net of tax of $22(8) - (40) - (40)
Unrealized loss on derivatives, net of tax of $(1)(4) - - (4) (4)
Foreign currency translation adjustment, net of tax of
nil(7) 1 - - 1
---------------- ----------------- ----------------- ----------
Balance at December 31, 2002 14 (96) (13) (95)
ADDITIONAL MINIMUM LIABILITY FOR EMPLOYEE FUTURE
BENEFITS, NET OF TAX OF $1(8) - (2) - (2)
UNREALIZED GAIN ON DERIVATIVES, NET OF TAX OF NIL(4) - - 8 8
FOREIGN CURRENCY TRANSLATION ADJUSTMENT, NET OF
TAX OF $(64)(7) (54) - - (54)
---------------- ------------------------------------ ----------
BALANCE AT DECEMBER 31, 2003 (40) (98) (5) (143)
================ ==================================== ==========
</Table>
(1) In accordance with U.S. GAAP, the Condensed Statement of
Consolidated Income and Balance Sheet are prepared using the equity
method of accounting for joint ventures. Excluding the impact of
other U.S. GAAP adjustments, the use of the proportionate
consolidation method of accounting for joint ventures, as required under
Canadian GAAP, results in the same net income and Shareholders' Equity.
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(2) In 2002, for U.S. GAAP purposes, TransCanada PipeLines Limited
(TCPL or the Company) adopted the transitional provisions of FASB
Emerging Issues Task Force (EITF) 02-3, "Accounting for Contracts
Involved in Energy Trading and Risk Management Activities" whereby
the Company was netting all revenues and expenses related to
derivative energy trading contracts. Prior to the adoption of
EITF 02-3, energy trading contracts were measured at fair value
determined as at the balance sheet date. The accounting change was
applied retroactively with reclassification of prior periods.
Effective January 1, 2003, the Company fully adopted EITF 02-3. This
accounting change was effected through a cumulative adjustment of
$(13) million, after tax, in the current year's income with no
restatement of prior periods. Substantially all of the energy
trading contracts are accounted for as hedges under Canadian GAAP.
Subsequent to October 1, 2003, the energy trading contracts that
qualified as hedges were accounted for as hedges under the provisions of
Statement of Financial Accounting Standards (SFAS) No. 133. All gains
or losses on the contracts that did not qualify as hedges, and the
amounts of any ineffectiveness on the hedging contracts, are
included in income each period. Substantially all of the amounts
recorded in 2003 as differences between U.S. and Canadian GAAP
relate to gains and losses on contracts that were not accounted for as
hedges.
(3) (a) Under Canadian GAAP, pre-operating costs incurred during the
commissioning phase of a new project are deferred until commercial
production levels are achieved. After such time, those costs are
amortized over the estimated life of the project. Under U.S. GAAP,
such costs are expensed as incurred. Certain start-up costs incurred
by Bruce Power L.P. (an equity investment) are required to be expensed
under U.S. GAAP.
(b) Under both Canadian GAAP and U.S. GAAP, interest is capitalized on
expenditures relating to construction of development projects
actively being prepared for their intended use. In Bruce Power L.P.,
under U.S. GAAP, the carrying value of development projects against
which interest is capitalized is lower due to the expensing of
pre-operating costs.
(4) Under the provisions of SFAS No. 133 "Accounting for
Derivatives and Hedging Activities", all derivatives are
recognized as assets and liabilities on the balance sheet and measured
at fair value. For derivatives designated as fair value hedges,
changes in the fair value are recognized in earnings together with an
equal or lesser amount of changes in the fair value of the hedged
item attributable to the hedged risk. For derivatives designated as
cash flow hedges, changes in the fair value of the derivatives that
are effective in offsetting the hedged risk are recognized in other
comprehensive income until the hedged item is recognized in earnings.
Any ineffective portion of the change in fair value is recognized in
earnings each period.
(5) Under U.S. GAAP, the financial charges related to preferred
securities are recognized as an expense, rather than dividends.
(6) Other expenses included an allowance for funds used during
construction of $2 million for the year ended December 31, 2003 (2002 -
$4 million).
(7) Under U.S. GAAP, changes in the foreign currency translation
adjustment account must be recorded as a component of comprehensive
income.
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(8) Under U.S. GAAP, a net loss recognized pursuant to SFAS No. 87
"Employers' Accounting for Pensions" as an additional pension
liability not yet recognized as net period pension cost, must be
recorded as a component of comprehensive income.
(9) Effective January 1, 2003, the Company adopted the provisions of
Financial Interpretation (FIN) 45 that require the recognition of a
liability for the fair value of certain guarantees that require
payments contingent on specified types of future events. The
measurement standards of FIN 45 are applicable to guarantees entered
into after January 1, 2003. For U.S. GAAP, the Company has recorded
the fair value of the guarantees ($4 million) arising on the
acquisition of the interest in Bruce Power L.P. as a liability and an
increase in the cost of the investment.
(10) Effective January 1, 2003, the Company adopted the provisions of
SFAS No. 143 "Accounting for Asset Retirement Obligations", which
addresses financial accounting and reporting for obligations associated
with asset retirement costs. SFAS No. 143 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.
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 that all retirement costs associated with the regulated
pipelines will be recovered through tolls in future periods.
The plant, property and equipment in the power business consists
primarily of power plants in Canada and the United States. The
estimated fair value of the liability for the power plants and
associated assets as at January 1, 2003 was $6 million. 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 December 31,
2003 was $7 million. The cumulative effect of the application of
SFAS No. 143 on income with respect to the years ended December 31,
2001 and 2002 would have been less than $1 million. The Company
has no legal liability for asset retirement obligations with
respect to its investment in Bruce Power L.P. and the Sundance A and
B power purchase arrangements.
(11) Under U.S. GAAP, the Company is required to record a deferred
income tax liability for its cost-of-service regulated
businesses. As these deferred income taxes are recoverable
through future revenues, a corresponding regulatory asset is recorded
for U.S. GAAP purposes.
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(12) Current liabilities at December 31, 2003 include dividends payable of
$136 million (2002 - $125 million) and current taxes payable of $271
million (2002 - $150 million).
(13) Under U.S. GAAP, the preferred securities are classified as a
liability. The fair value of the preferred securities at December
31, 2003 was $612 million (2002 - $743 million). The Company
made preferred securities charges payments of $57 million for the
year ended December 31, 2003 (2002 - $58 million).
(14) The Company's Statement of Consolidated Cash Flows under U.S. GAAP
would be identical to that under Canadian GAAP except that the
preferred securities charges would be classified with funds
generated from continuing operations.
(15) Effective December 31, 2003, the Company adopted the provisions of
FIN 46 "Consolidation of Variable Interest Entities". Adopting these
provisions has had no impact on the U.S. GAAP financial statements
of the Company.
SUMMARIZED FINANCIAL INFORMATION OF LONG-TERM INVESTMENTS(16)
<Table>
<Caption>
Three months ended Year ended
December 31 December 31
--------------------------- ----------------------------
(MILLIONS OF DOLLARS) 2003 2002 2003 2002
- ----------------------------------------------------------------- ------------- ------------ ------------- --------------
INCOME
Revenues 257 210 1,063 798
Other costs and expenses (157) (77) (528) (273)
Depreciation (28) (40) (141) (146)
Financial charges and other (19) (28) (53) (112)
------------- ------------ ------------- --------------
Proportionate share of income before income taxes of long-term
investments 53 65 341 267
============= ============ ============= ==============
</Table>
<Table>
<Caption>
December 31, December 31,
(MILLIONS OF DOLLARS) 2003 2002
- ---------------------------------------------------------------- ----------------- ------------------
BALANCE SHEET
Current assets 385 246
Plant, property and equipment 2,944 3,251
Other assets (net) - 112
Current liabilities (204) (216)
Deferred amounts (net) (286) -
Non-recourse debt (1,060) (1,646)
Deferred income taxes (19) (64)
----------------- ------------------
Proportionate share of net assets of long-term investments 1,760 1,683
================= ==================
</Table>
(16) This includes those investments that are accounted for by the equity
method under U.S. GAAP (including those that are accounted for by the
proportionate consolidation method under Canadian GAAP).
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