Consolidated Financial Review

Highlights

Net income was $1,440 million or $2.53 per share in 2008 compared to net income of $1,223 million or $2.31 per share in 2007.

TransCanada's comparable earnings of $1,279 million in 2008 excluded $152 million of gains from bankruptcy settlements with certain subsidiaries of Calpine Corporation (Calpine), proceeds of $10 million from a lawsuit settlement, a $27 million writedown of costs for the Broadwater LNG project (Broadwater) and $26 million of favourable income tax adjustments. Comparable earnings of $1,100 million in 2007 excluded favourable income tax adjustments of $102 million, a gain of $14 million on the sale of land and $7 million of net unrealized gains from changes in the fair value of proprietary natural gas storage inventory and natural gas forward purchase and sale contracts.

Net cash provided by operations was $2,840 million in 2008, an increase of $4 million from 2007.
Funds generated from operations were $3,021 million in 2008, an increase of $400 million or 15 per cent from 2007.

TransCanada invested $6.4 billion in its Pipelines and Energy businesses in 2008, including the following:

the acquisition of the Ravenswood facility in August 2008 for US$2.9 billion, subject to certain post-closing adjustments;
capital expenditures of $1.8 billion for Pipelines projects, including Keystone and North Central Corridor; and
capital expenditures of $1.3 billion for Energy projects, including the Bruce A restart of Units 1 and 2, and construction of Portlands Energy, Halton Hills, Kibby Wind and Cartier Wind.

In 2008, TransCanada issued $2.2 billion of long-term debt (net of issue costs) and $2.4 billion of common shares (net of issue costs), comprised primarily of the following:

in fourth quarter 2008, the issuance of 35.1 million common shares at $33.00 each, resulting in gross proceeds of $1.2 billion;
in second quarter 2008, the issuance of 34.7 million common shares at $36.50 each, resulting in gross proceeds of $1.3 billion;
in August 2008, the issuance of US$1.5 billion of Senior Unsecured Notes;
in August 2008, the issuance of $500 million of Medium-Term Notes; and
in accordance with its Dividend Reinvestment and Share Purchase Plan (DRP), the issuance of 6.0 million common shares from treasury in lieu of making cash dividend payments totalling $218 million.

In February 2009, the Company issued $700 million of Medium-Term Notes.
In January 2009, the Company issued US$2.0 billion of Senior Unsecured Notes.
In November 2008, TransCanada established a new US$1.0 billion committed bank facility.
In June 2008, the Company entered into an agreement for a US$1.5 billion one-year bridge loan facility. In August 2008, the Company drew US$255 million and cancelled the remainder of the commitment.

Total assets increased by $9.1 billion to $39.4 billion in 2008 compared to 2007, primarily due to the acquisition of the Ravenswood facility, investments in Energy and Pipelines capital projects, and the effect of a stronger U.S. dollar.
TransCanada's shareholders' equity increased by $3.1 billion to $12.9 billion in 2008 compared to the previous year.

On February 2, 2009, the Board of Directors of TransCanada increased the quarterly dividend on the Company's outstanding common shares for the quarter ending March 31, 2009 by six per cent to $0.38 per share from $0.36 per share. This was the ninth consecutive year in which the common share dividend was increased.

Refer to "Results of Operations" and to the "Liquidity and Capital Resources" sections of this MD&A for further discussion of these highlights.