Since 2000, TransCanada has followed a long-term approach of growing its Pipelines and Energy businesses in a diligent and disciplined manner. In 2007 and beyond, the Company's net earnings and cash flow, combined with a strong balance sheet, are expected to continue to provide the financial flexibility for TransCanada to pursue opportunities and create additional long-term value for its shareholders.

In 2007, the Company will continue to implement its Pipelines strategy, including:

• integrating ANR into TransCanada's existing Pipelines business;
• becoming the operator of Great Lakes in conjunction with the acquisition of an additional 3.55 per cent interest in Great Lakes, bringing its direct total ownership to 53.55 per cent, with PipeLines LP owning the remaining interest;
• engaging in discussions with Alberta System stakeholders following the conclusion of the current three-year settlement that expires at the end of 2007;
• proceeding with the Gas Transmission Northwest System rate case, which is scheduled to be in negotiations and answering discovery until the hearing phase begins on October 31, 2007;
• advancing development of the Keystone Pipeline;
• working with the MGP owners and the Aboriginal Pipeline Group (APG), including participating in regulatory proceedings as may be required, to advance the MGP project;
• working with project stakeholders and the State of Alaska to further advance the proposed Alaska Highway Pipeline project;
• developing transportation solutions for new market and supply growth opportunities that lead to potential expansions of the Alberta System;
• becoming the operator of Northern Border; and
• working with joint venture partners of partially owned pipeline systems to develop additional supply and market options for system customers.

TransCanada will continue to grow its Energy business in 2007. As in prior years, this growth is expected to come from a mix of greenfield developments, new acquisitions and organic growth within its existing assets and markets. In particular, in 2007, TransCanada expects to:

• work with Bruce A and its partners on the restart and refurbishment of the Bruce A units;
• complete construction of the second of six Cartier Wind projects in third quarter 2007 and begin construction of the third Cartier Wind facility;
• continue construction of the Portlands Energy project;
• initiate construction of the Halton Hills project;
• advance development of the Cacouna Energy project (Cacouna) and Broadwater Energy project (Broadwater) LNG facilities; and
• pursue additional greenfield projects and acquisition opportunities in TransCanada's key markets.

Although the following discussion reflects management's expectations for 2007, as discussed throughout this MD&A, a number of risk factors and developments may positively or negatively affect the actual results for 2007, as discussed throughout this MD&A, including the section entitled "Forward-Looking Information".

With the closing of the acquisition of ANR and Great Lakes, and the Company's increased ownership in PipeLines LP, TransCanada expects higher net earnings from Pipelines in 2007 compared to 2006. The combined effect of an expected decline in the average investment base of each of the Canadian Mainline and the Alberta System, and a decline in each of their formula-based regulated ROEs, is expected to decrease net earnings on these systems compared to 2006. Excluding any potential positive impact from a decision or settlement on the current rate case filing for the Gas Transmission Northwest System, reduced firm contract volumes on this system are expected to have a slightly negative impact on the results compared to 2006. In addition, Pipelines' 2006 net earnings included a $13 million gain on the sale of Northern Border Partners, L.P. interest, which will not occur in 2007. In 2007, TransCanada is expecting a positive impact from a full year of earnings from the Tamazunchale pipeline.

In Energy, net earnings in 2007 are expected to approximate or be slightly lower than 2006 net earnings due to the non-recurring $23-million future tax benefit in 2006 arising from reductions in federal and provincial income tax rates. Operating income is expected to be relatively consistent with 2006, although this is very dependent on commodity prices in each region as well as other factors such as hydrology and storage spreads. TransCanada's operating income from its investment in Bruce B can be significantly impacted by the effect, on uncontracted output, of changes in spot market prices for power. Excluding any changes in spot market prices for 2007 compared to 2006, Bruce Power's operating income is expected to decline in 2007 compared to 2006, reflecting lower projected generation volumes and higher operating costs resulting from an increase in planned outages in 2007. Western Power Operations' operating income in 2007 is expected to approximate 2006. Although TransCanada has sold forward significant output from its Alberta power purchase agreements (PPA) and power plants, Western Power Operations' operating income in 2007 can be significantly impacted by changes in the spot market price of power and market heat rates in Alberta. Eastern Power Operations' operating income is expected to increase in 2007 primarily due to a full year of operations for both the Bécancour natural gas-fired cogeneration facility and the first of six wind farms of the Cartier Wind project as well as the positive impact of the New England Power Pool (NEPOOL) forward capacity payments received by Ocean State Power (OSP) and TC Hydro commencing December 1, 2006. Gas Storage's operating income is expected to increase in 2007 over 2006 primarily due to the placing into service of the Edson facility at the end of 2006, partially offset by expected lower storage spreads.

Corporate's net expenses are expected to be higher in 2007 compared to 2006 primarily due to the income tax refunds and positive income tax adjustments realized in 2006 that are not expected to recur in 2007. Financing costs associated with the purchase of ANR are expected to increase net expenses in Corporate in 2007.