<Page>
EXHIBIT 2
FIRST QUARTER REPORT 2004
TCPL [17
CONSOLIDATED INCOME
Three months ended March 31 (unaudited)
<Table>
<Caption>
(millions of dollars) 2004 2003
- ------------------------------------------------------- ----- -----
REVENUES 1,233 1,336
OPERATING EXPENSES
Cost of sales 127 180
Other costs and expenses 374 427
Depreciation 232 215
----- -----
733 822
----- -----
OPERATING INCOME 500 514
OTHER EXPENSES/(INCOME)
Financial charges 195 204
Financial charges of joint ventures 14 22
Equity income (58) (58)
Interest and other income (15) (13)
----- -----
136 155
----- -----
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND NON-CONTROLLING INTERESTS 364 359
INCOME TAXES
Current 107 62
Future 23 74
NON-CONTROLLING INTERESTS 6 -
----- -----
NET INCOME 228 223
PREFERRED SECURITIES CHARGES 8 9
PREFERRED SHARE DIVIDENDS 6 6
----- -----
NET INCOME APPLICABLE TO COMMON SHARES 214 208
----- -----
----- -----
</Table>
See accompanying Notes to the Consolidated Financial Statements.
<Page>
FIRST QUARTER REPORT 2004
TCPL [18
CONSOLIDATED CASH FLOWS
Three months ended March 31 (unaudited)
<Table>
<Caption>
(millions of dollars) 2004 2003
- ------------------------------------------------------- ----- -----
CASH GENERATED FROM OPERATIONS
Net income 228 223
Depreciation 232 215
Future income taxes 23 74
Equity income in excess of distributions received (51) (51)
Other (9) (4)
----- -----
Funds generated from operations 423 457
Increase in operating working capital (42) (8)
----- -----
Net cash provided by continuing operations 381 449
Net cash (used in)/provided by discontinued operations (2) 4
----- -----
379 453
----- -----
INVESTING ACTIVITIES
Capital expenditures (101) (76)
Acquisitions, net of cash acquired - (409)
Deferred amounts and other (45) (18)
----- -----
Net cash used in investing activities (146) (503)
----- -----
FINANCING ACTIVITIES
Dividends and preferred securities charges (148) (139)
Notes payable (repaid)/issued, net (229) 209
Long-term debt issued 665 -
Reduction of long-term debt (476) (9)
Non-recourse debt of joint ventures issued 6 17
Reduction of non-recourse debt of joint ventures (9) (16)
Common shares issued - 16
----- -----
Net cash (used in)/provided by financing activities (191) 78
----- -----
INCREASE IN CASH AND SHORT-TERM INVESTMENTS 42 28
CASH AND SHORT-TERM INVESTMENTS
Beginning of period 337 212
----- -----
CASH AND SHORT-TERM INVESTMENTS
End of period 379 240
----- -----
----- -----
SUPPLEMENTARY CASH FLOW INFORMATION
Income taxes paid 161 55
Interest paid 172 190
----- -----
----- -----
</Table>
See accompanying Notes to the Consolidated Financial Statements.
<Page>
FIRST QUARTER REPORT 2004
TCPL [19
CONSOLIDATED BALANCE SHEET
<Table>
<Caption>
March 31, 2004 December 31,
(millions of dollars) (unaudited) 2003
- ------------------------------------------------------------ -------------- ------------
ASSETS
CURRENT ASSETS
Cash and short-term investments 379 337
Accounts receivable 555 603
Inventories 161 165
Other 110 88
-------------- ------------
1,205 1,193
LONG-TERM INVESTMENTS 782 733
PLANT, PROPERTY AND EQUIPMENT 17,336 17,460
OTHER ASSETS 1,483 1,164
-------------- ------------
20,806 20,550
-------------- ------------
-------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable 138 367
Accounts payable 955 1,069
Accrued interest 241 208
Current portion of long-term debt 489 550
Current portion of non-recourse debt of joint ventures 25 19
-------------- ------------
1,848 2,213
DEFERRED AMOUNTS 642 475
LONG-TERM DEBT 9,835 9,465
FUTURE INCOME TAXES 434 427
NON-RECOURSE DEBT OF JOINT VENTURES 760 761
JUNIOR SUBORDINATED DEBENTURES 19 22
-------------- ------------
13,538 13,363
-------------- ------------
NON-CONTROLLING INTERESTS 85 82
-------------- ------------
SHAREHOLDERS' EQUITY
Preferred securities 672 672
Preferred shares 389 389
Common shares 4,632 4,632
Contributed surplus 268 267
Retained earnings 1,259 1,185
Foreign exchange adjustment (37) (40)
-------------- ------------
7,183 7,105
-------------- ------------
20,806 20,550
-------------- ------------
-------------- ------------
</Table>
See accompanying Notes to the Consolidated Financial Statements.
<Page>
FIRST QUARTER REPORT 2004
TCPL [20
CONSOLIDATED RETAINED EARNINGS
Three months ended March 31 (unaudited)
<Table>
<Caption>
(millions of dollars) 2004 2003
- ------------------------------------------------------------ ----- ----
Balance at beginning of period 1,185 854
Net income 228 223
Preferred securities charges (8) (9)
Preferred share dividends (6) (6)
Common share dividends (140) (129)
----- ----
1,259 933
----- ----
----- ----
</Table>
See accompanying Notes to the Consolidated Financial Statements.
<Page>
FIRST QUARTER REPORT 2004
TCPL [21
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.
<Page>
FIRST QUARTER REPORT 2004
TCPL [22
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 it is reasonable to assume 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 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 March 31, 2004 was $9 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 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 March 31, 2004 was $2 million.
The impact of this change on TCPL's net income in first quarter 2004 and prior
periods was nil.
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 a decrease to first
quarter 2004 net income of $2 million. The significant impact of the accounting
change on the Consolidated Balance Sheet as at January 1, 2004 is as follows.
<Page>
FIRST QUARTER REPORT 2004
TCPL [23
<Table>
<Caption>
(unaudited - millions of dollars) Increase/(Decrease)
- --------------------------------------------------------- -------------------
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
-------------------
</Table>
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 generally accepted accounting principles (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 first quarter 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 recorded on the balance
sheet. The impact of the change on the consolidated balance sheet as at January
1, 2004 is as follows.
<Table>
<Caption>
(unaudited - millions of dollars) Increase/(Decrease)
- --------------------------------------------------------- -------------------
Other Assets 153
-------------------
Deferred Amounts 80
Long-Term Debt 76
Preferred Securities (3)
-------------------
Total Liabilities 153
-------------------
</Table>
<Page>
FIRST QUARTER REPORT 2004
TCPL [24
3. SEGMENTED INFORMATION
<Table>
<Caption>
GAS TRANSMISSION POWER CORPORATE TOTAL
Three months ended March 31 ---------------- ------------ ------------ -------------
(unaudited - millions of dollars) 2004 2003 2004 2003 2004 2003 2004 2003
- --------------------------------------- ----- ---- ---- ---- ---- ---- ----- -----
Revenues 949 960 284 376 - - 1,233 1,336
Cost of sales - - (127) (180) - - (127) (180)
Other costs and expenses (285) (304) (87) (121) (2) (2) (374) (427)
Depreciation (212) (194) (20) (21) - - (232) (215)
----- ---- ---- ---- ---- ---- ----- -----
Operating income/(loss) 452 462 50 54 (2) (2) 500 514
Financial charges and non-controlling
interests (192) (196) (2) (2) (21) (21) (215) (219)
Financial charges of joint ventures (14) (22) - - - - (14) (22)
Equity income 10 20 48 38 - - 58 58
Interest and other income 3 5 4 4 8 4 15 13
Income taxes (110) (111) (35) (31) 15 6 (130) (136)
----- ---- ---- ---- ---- ---- ----- -----
NET INCOME APPLICABLE TO COMMON SHARES 149 158 65 63 - (13) 214 208
----- ---- ---- ---- ---- ---- ----- -----
----- ---- ---- ---- ---- ---- ----- -----
</Table>
<Table>
<Caption>
March 31, 2004 December 31,
(millions of dollars) (unaudited) 2003
- -------------------------------------------- -------------- ------------
Gas Transmission 16,908 16,974
Power 2,830 2,753
Corporate 1,058 812
-------------- ------------
Continuing Operations 20,796 20,539
Discontinued Operations 10 11
-------------- ------------
20,806 20,550
-------------- ------------
-------------- ------------
</Table>
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. The tables reflect the impact
of 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 the foreign exchange risk of U.S. dollar debt, U.S. dollar
expenses and the 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.
<Page>
FIRST QUARTER REPORT 2004
TCPL [25
<Table>
<Caption>
Asset/(Liability) March 31, 2004
(millions of dollars) (unaudited) December 31, 2003
- ------------------------------------ -------------------- --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----
FOREIGN EXCHANGE
Cross-currency swaps (21) (21) (26) (26)
INTEREST RATE
Interest rate swaps
Canadian dollars 23 23 2 15
U.S. dollars 9 9 - 8
- ---------------------------------------------------------------------------------------
</Table>
At March 31, 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 $769 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.
<Table>
<Caption>
Asset/(Liability) March 31, 2004
(millions of dollars) (unaudited) December 31, 2003
- ------------------------------------ -------------------- --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----
INTEREST RATE
Interest rate swaps
U.S. dollars 44 44 2 37
FORWARD FOREIGN EXCHANGE CONTRACTS
U.S. dollars (4) (4) - -
- ---------------------------------------------------------------------------------------
</Table>
At March 31, 2004, the notional principal amount for interest rate swaps was
US$550 million (December 31, 2003 - US$500 million) and the principal amount of
forward foreign exchange contracts was US$200 million (December 31, 2003 - nil).
5. ACQUISITION
On February 24, 2004, TCPL announced an agreement to acquire Gas Transmission
Northwest Corporation (GTN) from National Energy & Gas Transmission Inc. 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. The acquisition is subject to bankruptcy
court approval, including completion of a court-sanctioned auction process,
regulatory approval and an anti-trust review.
<Page>
FIRST QUARTER REPORT 2004
TCPL [26
6. SALE OF ASSETS
On March 29, 2004, TCPL entered into an agreement to sell the ManChief and
Curtis Palmer power facilities for US$402.6 million to Power LP. TCPL expects to
recognize a gain of approximately $10 million after tax on the sale of these
assets. The sale is subject to certain post closing adjustments, approval by
Power LP's unitholders and applicable regulatory approvals. TCPL expects to
complete the sale of these assets on or about May 5, 2004. Power LP's
unitholders will be asked at a special meeting to be held on April 29, 2004 to
approve the acquisition and to remove Power LP's obligation to redeem all units
not owned by TCPL in 2017.
Power LP expects to fund the transaction through an offering of 8.11 million
subscription receipts which closed April 15, 2004 and a bridge loan facility
from a Canadian chartered bank. As part of the subscription receipts offering,
TCPL purchased 540,000 subscription receipts for an aggregate purchase price of
approximately $20 million. Subsequent to the transaction being completed, TCPL's
ownership interest in Power LP will be reduced from 35.6 per cent to
approximately 30.6 per cent. TCPL expects the removal of the redemption
obligation and the reduction in ownership interest will result in a gain of
approximately $165 million after tax. This amount primarily reflects the
recognition of unamortized gains on previous Power LP transactions.
- -------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------