Management’s Discussion and Analysis should be read in conjunction with the audited Consolidated Financial Statements of TransCanada PipeLines Limited (TransCanada or the company) and the notes thereto for the year ended December 31, 2002.
Earnings Increase Net earnings from the Transmission business increased $68 million to $653 million in 2002 compared to $585 million in 2001. Contributing to this increase were the Alberta System – $10 million, Canadian Mainline – $33 million and NAPV – $24 million.
Alberta System The 2001/2002 Alberta System Rate Settlement (ASRS) expired at the end of 2002. Through a consultative process with major stakeholders, TransCanada reached a one-year settlement to establish a fixed revenue requirement for 2003. The settlement, together with proposed modifications to rate design, and new services currently before the EUB for approval, will form the basis of the Alberta System’s tolls for 2003.
Canadian Mainline In June 2002, TransCanada received the NEB’s Fair Return decision to determine the cost of capital to be included in the calculation of 2001 and 2002 tolls on TransCanada’s Canadian Mainline. Despite the fact that the NEB granted an increase in the Canadian Mainline’s deemed common equity ratio from 30 to 33 per cent, TransCanada was disappointed with this decision, and the NEB’s denial of the request for a review and variance of the Fair Return decision, because it did not adequately recognize the long-term business risks to the Canadian Mainline.
Year ended December 31 |
|
2002 |
|
2001 |
|
2000 |
 |
|
|
|
|
|
|
(millions of dollars)
|
|
|
|
|
|
|
Wholly-Owned Pipelines |
|
|
|
|
|
|
Alberta System |
|
214 |
|
204 |
|
219 |
Canadian Mainline |
|
307 |
|
274 |
|
281 |
BC System |
|
6 |
|
5 |
|
6 |
|
|
|
|
|
|
|
| |
|
527 |
|
483 |
|
506 |
|
|
|
|
|
|
|
North American Pipeline Ventures
|
|
|
|
|
|
|
Great Lakes |
|
66 |
|
56 |
|
52 |
TC PipeLines, LP |
|
17 |
|
15 |
|
11 |
Iroquois |
|
18 |
|
16 |
|
13 |
Portland |
|
2 |
|
(1) |
|
(2) |
Foothills |
|
17 |
|
20 |
|
22 |
Trans Québec & Maritimes |
|
8 |
|
8 |
|
8 |
Tuscarora |
|
– |
|
– |
|
9 |
CrossAlta |
|
13 |
|
8 |
|
6 |
Northern Development |
|
(6) |
|
(9) |
|
(3) |
Other |
|
(9) |
|
(11) |
|
1 |
|
|
|
|
|
|
|
| |
|
126 |
|
102 |
|
117 |
|
|
|
|
|
|
|
Net earnings |
|
653 |
|
585 |
|
623 |
|
|
|
|
|
|
|
In 2002, net earnings from the Transmission business were $653 million, compared to $585 million and $623 million in 2001 and 2000, respectively. The increase in 2002 over 2001 was mainly due to the Canadian Mainline Fair Return decision, higher incentive earnings from wholly-owned pipelines, and higher earnings from TransCanada’s investment in Great Lakes. The decrease in 2001 over 2000 was mainly due to lower earnings from the Alberta System and Canadian Mainline as well as higher costs related to the company’s Northern Development activities.
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