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TransCanada Reports 2011 Comparable Earnings of $1.6 Billion Increases Common Share Dividend by Five Per Cent

2011 Forth Quarter Results
2011 Fourth Quarter Results (French)

CALGARY, Alberta – February 14, 2012 – TransCanada Corporation (TSX, NYSE: TRP) (TransCanada or the Company) today announced comparable earnings for fourth quarter 2011 of $366 million or $0.52 per share.  For the year ended December 31, 2011, comparable earnings were $1.6 billion or $2.23 per share.  Net income attributable to common shares for fourth quarter 2011 was $375 million or $0.53 per share, and for the year ended December 31, 2011, $1.5 billion or $2.18 per share.

TransCanada’s Board of Directors also declared a quarterly dividend of $0.44 per common share for the quarter ending March 31, 2012, equivalent to $1.76 per common share on an annualized basis, an increase of five per cent.  This is the twelfth consecutive year the Board of Directors has raised the dividend.

"TransCanada experienced a strong 2011 driven by incremental earnings from $10 billion of new assets placed into service since mid-2010, and the Company's existing diverse and high-quality energy infrastructure portfolio," said Russ Girling, TransCanada's president and chief executive officer.  "Comparable earnings for 2011 were $2.23 per share, a 13 per cent increase over 2010.

“Having made substantial progress on our unprecedented capital program, these new operating assets are doing what they were designed to do – producing sustainable earnings and cash flow for our shareholders while delivering energy safely and reliably to customers across North America,” added Girling.

The Company is positioned to complete another $12 billion of new projects that are expected to come into service between now and early 2015 including the Bruce Power restart program in Ontario, additional extensions and expansions of the Alberta System, the final phase of the Cartier Wind power project in Québec, nine Ontario solar projects and the Keystone Gulf Coast Expansion (Keystone XL).  TransCanada expects these assets to generate significant, sustained earnings and cash flow growth and deliver superior returns to our shareholders.


Fourth Quarter and Year-End Highlights
(All financial figures are unaudited and in Canadian dollars unless noted otherwise)

  • For fourth quarter 2011
    • Comparable earnings of $366 million or $0.52 per share
    • Comparable earnings before interest, taxes, depreciation and amortization (EBITDA) of $1.2 billion
    • Net income attributable to common shares of $375 million or $0.53 per share
    • Funds generated from operations of $881 million
  • For the year ended December 31, 2011
    • Comparable earnings of $1.6 billion or $2.23 per share
    • Comparable EBITDA of $4.8 billion
    • Net income attributable to common shares of $1.5 billion or $2.18 per share
    • Funds generated from operations of $3.7 billion

  • Announced an increase in the quarterly dividend per common share of five per cent to $0.44 for the quarter ending March 31, 2012

  • Began generating incremental EBITDA from $10 billion of capital projects placed into service since mid-2010, adding significant contracted earnings and cash flow. Some 2011 examples include:

    • The US$630 million Bison natural gas pipeline commenced operations in January
    • The Wood River/Patoka, Illinois section and the Cushing extension of the Keystone oil pipeline, costing $6 billion, began recognizing EBITDA in February
    • The US$500 million Coolidge Generating Station commenced commercial operations in May
    • The US$360 million Guadalajara natural gas pipeline was completed in June
    • The Montagne-Sèche and phase one of the Gros-Morne wind farms, capable of producing 159 megawatts (MW) of renewable energy, were completed in November

  • Agreed to purchase nine Ontario solar projects for approximately $470 million. The projects have a combined capacity of 86 MW and are underpinned by 20-year power purchase agreements (PPA) with the Ontario Power Authority (OPA).

  • Advanced commercial arrangements in the Oil Pipelines business
    • Secured additional long-term, binding commitments in support of the Keystone XL pipeline. The Keystone pipeline system has secured firm, long term contracts for more than 1.1 million barrels per day (bbl/d) for an average term of approximately 18 years.
    • Announced plans to build the Houston Lateral and increase the capacity of Keystone XL to 830,000 bbl/d at a cost of US$600 million. The expansion will increase the capacity on the entire Keystone pipeline system to 1.4 million bbl/d.


Comparable earnings for fourth quarter 2011 were $366 million or $0.52 per share compared to $384 million or $0.55 per share for the same period in 2010. Incremental earnings from Keystone and other recently commissioned assets, combined with higher power prices in Alberta, were more than offset by lower contributions from Bruce Power related to planned plant outages, higher interest expense as a result of lower capitalized interest, reduced earnings from U.S. Power, and net realized losses in 2011 compared to gains in 2010 from derivatives used to manage foreign exchange rate fluctuations.

Comparable earnings for the year ended December 31, 2011 were $1.565 billion or $2.23 per share compared to $1.361 billion or $1.97 per share in 2010. The increase was primarily due to higher power prices in Alberta and incremental earnings from recently commissioned assets. Partially offsetting these increases were higher interest expenses and lower contributions from Bruce Power, Natural Gas Storage and U.S. Power.

Net income attributable to common shares for fourth quarter 2011 was $375 million or $0.53 per share compared to $269 million or $0.39 per share in fourth quarter 2010. Net income attributable to common shares for the year ended December 31, 2011 was $1.527 billion or $2.18 per share compared to $1.227 billion or $1.78 per share in 2010. Net income for the fourth quarter and year ended December 31, 2010 included a $127 million after-tax ($0.18 per share) valuation provision against advances to the Aboriginal Pipeline Group for the Mackenzie Gas Project and net unrealized gains resulting from changes in the fair value of certain risk management activities.

Notable recent developments in Oil Pipelines, Natural Gas Pipelines, Energy and Corporate include:

Oil Pipelines

  • In November 2011, the U.S. Department of State (DOS) determined it necessary to identify and assess alternative routes for Keystone XL that would avoid the Sandhills region in Nebraska in order to move forward with a decision on the Presidential Permit. The DOS indicated it expected this process to take until first quarter 2013.

    TransCanada continues to work with the State of Nebraska to determine the best route that avoids the Sandhills region in Nebraska.

  • In December 2011, TransCanada concluded a successful open season for its Houston Lateral project and signed long-term contracts to transport crude oil from Hardisty, Alberta to Houston, Texas. The US$600 million project would increase the capacity of Keystone XL to 830,000 bbl/d and involve the construction of an 80-Kilometre (km) (50-mile) pipeline extension from the proposed Keystone XL expansion. The Houston Lateral is expected to more than double the U.S. Gulf Coast refining market capacity directly accessible from Keystone to over four million bbl/d and is expected to be in service by early 2015.

    The capital cost of Keystone XL, including the Houston Lateral, is estimated to be US$7.6 billion, with US$2.4 billion having been invested as of December 31, 2011. The remainder is expected to be spent between now and the in-service date of the expansion, which is expected by early 2015.
  • In fourth quarter 2011, TransCanada secured additional contractual support for the Cushing Marketlink project, which would transport crude oil from Cushing to Port Arthur and Houston, Texas. The US$50 million project would use a portion of the Keystone XL facilities, including the Houston Lateral. Cushing Marketlink is expected to begin shipping crude oil in early 2015.

  • TransCanada is pursuing opportunities to transport growing Bakken shale crude oil production from the Williston Basin in Montana and North Dakota to major U.S. refining markets. In 2010, the Company secured firm, five-year shipper contracts totalling 65,000 bbl/d for its proposed US$140 million Bakken Marketlink project, which would transport U.S. crude oil from Baker, Montana to Cushing, Oklahoma on facilities that form part of Keystone XL. This project is expected to be operational early in 2015.

  • On December 23, 2011, the Temporary Payroll Tax Cut Continuation Act was approved by the U.S. Senate and the U.S. House of Representatives and signed into law by U.S. President Obama. The legislation required a final decision on the Keystone XL Presidential Permit by February 21, 2012.

  • On January 18, 2012, DOS announced that the Presidential Permit for Keystone XL was denied because it was unable to determine if the pipeline was in the national interest prior to the end of the two-month Congressional deadline. The denial was not based on the merits of the project.

  • The Company, while disappointed, remains fully committed to the construction of Keystone XL. Plans are already underway on a number of fronts to largely maintain the construction schedule of the project. TransCanada will re-apply for a Presidential Permit and expects a new application would be processed in an expedited manner to allow for an in-service date of early 2015.

Natural Gas Pipeline

  • The Alberta System continues to grow through new connections of supply primarily in the Horn River/Montney shale basins in B.C. as well as the deep basin in Alberta.

    The Company has filed applications with the National Energy Board (NEB) requesting approval for expansions of the Alberta System to accommodate requests for additional natural gas transmission service throughout the northwest and northeast portions of the Western Canada Sedimentary Basin (WCSB). TransCanada has incremental, firm commitments to transport approximately 3.4 billion cubic feet per day (Bcf/d) from western Alberta and northeast B.C. by 2014. Further requests for additional volumes on the Alberta System from the northwest portion of the WCSB have been received.

    In 2011, including the projects discussed above, the NEB approved natural gas pipeline projects with capital costs of approximately $910 million. Further pipeline projects with a total capital cost of approximately $810 million are awaiting NEB decision. In addition, infrastructure to connect WCSB supply to markets continues to be pursued particularly to support further development of Alberta oil sands production and to supply proposed liquefied natural gas (LNG) export facilities on the West Coast.

  • On September 1, 2011, TransCanada filed a comprehensive application with the NEB to change the business structure and the terms and conditions of service for the Canadian Mainline, including addressing tolls for 2012 and 2013. On October 31, 2011, TransCanada filed supplementary information on the cost-of-service and proposed tolls for 2012 and 2013. The application results in a 2012 Nova Inventory Transfer System to Dawn toll of $1.29 per gigajoule (GJ) which is $0.82 per GJ or 38 per cent lower than comparable tolls charged in 2011. The oral hearing is scheduled to begin June 4, 2012. A decision on this application is expected in late 2012 or early 2013.

  • TransCanada re-filed an application in November 2011 that included supplemental information for approval to construct $130 million of new pipeline infrastructure on the Canadian Mainline that is required to receive Marcellus shale basin natural gas from the U.S. at the Niagara Falls receipt point for further transportation to eastern markets.

  • Gas Transmission Northwest LLC reached a settlement agreement with its shippers for new transportation rates that are effective January 2012 through December 2015 and were approved by the U.S. Federal Energy Regulatory Commission (FERC) in November 2011.

  • The Alaska Pipeline Project team continues to work with shippers to resolve conditional bids received as part of the project’s open season. The team is also working toward the FERC application deadline of October 2012 for the Alberta option that would transport gas from Alaska to the Alberta System and on to other continental markets. TransCanada has started discussions with Alaska North Slope producers on the LNG option that would require a pipeline from Prudhoe Bay to LNG facilities, to be built by third parties, located in south-central Alaska.

Energy

  • The refurbishment of Units 1 and 2 at the Bruce Power nuclear facility in Ontario continues to progress. Unit 2 is expected to begin operations in the first quarter of 2012 and Unit 1 is expected to be in service in the third quarter.

    TransCanada's share of the total capital cost is expected to be $2.4 billion. Once the refurbishment is complete, Bruce Power will be the world’s largest nuclear facility, capable of providing more than 6,200 MW or about 25 per cent of Ontario’s power.

  • Construction continues on the five-stage, 590 MW Cartier Wind project in Québec. In November 2011, the 58 MW Montagne-Sèche and 101 MW first phase of the Gros-Morne wind farm projects began operating. The 111 MW second phase of Gros-Morne wind farm is expected to be operational in December 2012. These are the fourth and fifth Québec-based wind farms of Cartier Wind, which is 62 per cent owned by TransCanada. All of the power produced by Cartier Wind is sold under a 20-year PPA to Hydro-Québec.

  • In December 2011, an agreement was announced for the purchase of nine Ontario solar projects with a combined capacity of 86 MW for approximately $470 million. TransCanada will purchase each project once construction and acceptance testing are completed and operations have begun under a 20-year PPA with the OPA under the Feed-In Tariff program.
  • The dispute arising out of TransAlta Corporation's claims of force majeure and economic destruction for the Sundance A facility will be heard through a single binding arbitration process. The arbitration panel has scheduled a hearing in April 2012 for these claims. Assuming the hearing concludes within the time allotted, TransCanada expects to receive a decision in mid-2012.

    TransCanada does not believe the owner's claims meet the tests of force majeure or destruction as specified in the PPA and therefore continues to record revenues and costs as though this event is an interruption of supply, in accordance with the terms of the PPA. The outcome of any arbitration process is not certain, however, TransCanada believes the matter will be resolved in its favour.

Corporate

  • The Board of Directors of TransCanada declared a quarterly dividend of $0.44 per share for the quarter ending March 31, 2012 on TransCanada’s outstanding common shares. The quarterly amount is equivalent to $1.76 per common share on an annual basis and represents a five per cent increase over the previous amount.

  • In November 2011, TransCanada PipeLines Limited (TCPL) issued Medium Term Notes of $500 million and $250 million maturing in 2021 and 2041, respectively, and bearing interest at 3.65 per cent and 4.55 per cent, respectively. The proceeds were used to fund the Alberta System and Canadian Mainline rate bases.

 

Teleconference – Audio and Slide Presentation:

TransCanada will hold a teleconference and webcast to discuss its 2011 fourth quarter financial results. Russ Girling, TransCanada president and chief executive officer and Don Marchand, executive vice-president and chief financial officer, along with other members of the TransCanada executive leadership team, will discuss the financial results and company developments before opening the call to questions from analysts and members of the media.

Event:
TransCanada 2011 fourth quarter financial results teleconference and webcast

Date:
Tuesday, February 14, 2012

Time:
1 p.m. mountain standard time (MST) / 3 p.m. eastern standard time (EST)

Analysts, members of the media and other interested parties are invited to participate by calling 866.226.1792 or 416.340.2216 (Toronto area). Please dial in 10 minutes prior to the start of the call. No pass code is required. A live webcast of the teleconference will be available at www.transcanada.com.

A replay of the teleconference will be available two hours after the conclusion of the call until midnight (EST) February 21, 2012. Please call 905.694.9451 or 800.408.3053 (North America only) and enter pass code 8130635.

With more than 60 years experience, TransCanada is a leader in the responsible development and reliable operation of North American energy infrastructure including natural gas and oil pipelines, power generation and gas storage facilities. TransCanada's network of wholly owned natural gas pipelines extends more than 57,000 kilometres (35,500 miles), tapping into virtually all major gas supply basins in North America. TransCanada is one of the continent's largest providers of gas storage and related services with approximately 380 billion cubic feet of storage capacity. A growing independent power producer, TransCanada owns or has interests in over 10,800 megawatts of power generation in Canada and the United States. TransCanada is developing one of North America's largest oil delivery systems. TransCanada's common shares trade on the Toronto and New York stock exchanges under the symbol TRP. For more information visit: www.transcanada.com or check us out on Twitter @TransCanada.

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