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Energy

Energy

Opportunities and Developments

Ravenswood

In August 2008, TransCanada acquired the multiple-unit Ravenswood generating facility located in Queens, New York, which employs dual-fuel capable steam turbine, combined-cycle and combustion turbine technology. During 2008, Ravenswood operated under a tolling arrangement that existed at the date of acquisition and expired on December 31, 2008. Under the tolling arrangement, all energy generated from the facility was provided to Hess Corporation for a fixed operating fee. In January 2009, Ravenswood commenced earning revenues from the sale of energy generated from the facility into the New York market. TransCanada's marketing operation located in Westborough, Massachusetts manages the marketing of output from Ravenswood.

The integration into TransCanada's operations of the Ravenswood generating station, acquired in August 2008, is now complete. Shortly after closing the acquisition, TransCanada experienced a forced outage event affecting one of the larger multiple generating units. The unit is currently undergoing repair and it is expected that the event will be insured both for physical damage and business interruption. Other refurbishment work is being undertaken at the station while the repair work is being completed and as a result, unit availability is expected to improve in the future.

Bruce Power

Under a long-term agreement reached in 2005 between Bruce Power and the OPA, Bruce A has committed to refurbish and restart the currently idle Units 1 and 2, extend the operating life of Unit 3 with a full refurbishment and replace the steam generators on Unit 4. Bruce Power and the OPA amended the Bruce A refurbishment agreement in 2007 to allow for a full refurbishment of Unit 4, which will extend the expected operating life of the unit. Under the 2007 amendment, the OPA had the option to elect, prior to April 1, 2008, to proceed with a three-unit refurbishment and restart program instead of the revised four-unit program. The OPA chose to not exercise this option and instead elected to proceed with the four-unit refurbishment and restart program.

In fourth quarter 2008, Bruce Power completed a review of the operating life estimates for Units 3 and 4. Unit 3 is now expected to remain in commercial service until 2011, which provides the benefit of nearly two additional years of power generation before the unit commences an expected 36 month refurbishment. After the refurbishment, the operating life of Unit 3 is expected to be extended to 2038 from 2037. In addition, Unit 4 is now expected to remain in commercial service until 2016, providing nearly seven years of generation before the unit commences a similar refurbishment period, after which, the estimated operating life of Unit 4 is expected to be extended to 2042 from 2036.

The capital cost for the refurbishment and restart of Bruce A Units 1 and 2 is expected to be approximately $3.4 billion, based on a comprehensive review in January 2008 of the estimated costs to complete the project, which is an increase from the original cost estimate of $2.75 billion. TransCanada's share is expected to be approximately $1.7 billion, compared to an original estimate of $1.4 billion. The project cost increases are subject to the capital cost risk- and reward-sharing mechanism under TransCanada's agreement with the OPA. Bruce A Units 1 and 2 are expected to produce an additional 1,500 MW of power when completed in 2010.

As at December 31, 2008, Bruce A had incurred $2.6 billion in costs with respect to the refurbishment and restart of Units 1 and 2 and approximately $200 million for the refurbishment of Units 3 and 4.

Portlands Energy

Construction continued in 2008 on Portlands Energy. The facility was operational in single-cycle mode in the summer of 2008 and is expected to be fully commissioned in its combined-cycle mode in first quarter 2009. Portlands Energy will provide power under a 20-year Accelerated Clean Energy Supply contract with the OPA. The expected capital cost is $730 million, of which TransCanada's portion is 50 per cent.

Coolidge

In May 2008, the Phoenix, Arizona-based utility, Salt River Project, signed a 20-year power purchase contract to secure 100 per cent of the output from the simple-cycle natural gas-fired peaking power facility currently under development. In December 2008, the Arizona Corporation Commission granted a Certificate of Environmental Compatibility approving construction of the facility. Construction is expected to begin in the summer of 2009 and the facility is expected to be commissioned in 2011.

Halton Hills

Construction of Halton Hills continued in 2008. The project includes the construction and operation of a natural gas-fired power plant near the town of Halton Hills, Ontario. TransCanada expects to invest approximately $670 million in the project, which is anticipated to be in service in third quarter 2010. Power from the facility will be sold to the OPA under a 20-year Clean Energy Supply contract.

Cartier Wind

The Carleton wind farm commenced commercial operation in November 2008, providing up to 109 MW of power to the Hydro-Québec grid. Carleton is the third phase of the six-phase, multi-year Cartier Wind project, located in the Gaspé region of Québec. The first two phases, Baie-des-Sables and Anse-à-Valleau, went into service in November of 2006 and 2007, respectively, generating up to 110 MW and 101 MW of power, respectively. The remaining phases of Cartier Wind are expected to be constructed through 2012, subject to the necessary approvals. Capacity is expected to total 740 MW when all six phases are complete. TransCanada has a 62 per cent ownership interest in these wind farms.

Kibby Wind

In July 2008, the State of Maine's Land Use Regulation Commission approved the final development plan submitted by TransCanada to build, own and operate a wind farm, located in the Kibby and Skinner townships in Maine. Construction of the facilities at a cost of approximately US$320 million began in July 2008 and commissioning of the first phase is expected to begin in fourth quarter 2009.

Bécancour

TransCanada entered into an agreement with Hydro-Québec in November 2007 to temporarily suspend all electricity generation from the Bécancour power plant during 2008. In 2008, the agreement was extended through to December 2009. In 2009, TransCanada will continue to receive payments under the agreement similar to those that would have been received under the normal course of operation.

Power Transmission Line Projects

TransCanada is pursuing proposals to build, own and operate power transmission lines, including the Zephyr and Chinook transmission line projects. The projects are each proposed 500 kilovolt (kV) high voltage direct current (HVDC) transmission lines originating in Wyoming and Montana, respectively, and terminating in Nevada. If constructed, each project would cost approximately US$3 billion and be capable of delivering 3,000 MW of power. In December 2008, TransCanada filed applications for both projects requesting approval from the FERC to charge negotiated rates and to proceed with an open season in the spring of 2009, with 50 per cent of the capacity of each line already pre-subscribed for a period of 25 years. In February 2009, the FERC approved both applications. Pending successful completion of the open seasons, regulatory work could commence later in 2009, followed by construction commencing in 2012 and a potential in-service date of late 2014.

TransCanada is pursuing a proposal to build NorthernLights, a 500 kV HVDC electric transmission line running from central Alberta to a terminal in southern Alberta and interconnecting with the Pacific Northwest. NorthernLights is expected to cost approximately $2 billion and provide up to 3,000 MW of power.

Broadwater LNG

In March 2008, the FERC authorized the construction and operation of Broadwater, subject to conditions. In April 2008, the New York Department of State determined that construction and operation of the project would not be consistent with the State's coastal zone policies. As a result of this unfavourable decision, TransCanada wrote down $27 million after tax ($41 million pre-tax) of costs for Broadwater that had been capitalized to March 31, 2008. TransCanada has appealed the determination of the New York Department of State to the U.S. Department of Commerce and a decision is expected in early 2009.