TransCanada delivered strong operating and financial results in 2008. Each of our major business units generated strong results, with growing cash flows and excellent progress on major initiatives. Capital projects were executed to a very high standard, setting the stage for continued growth in earnings, cash flow and shareholder value in the years to come.

In 2008, TransCanada earned $1.4 billion or $2.53 per share, compared to $1.2 billion or $2.31 per share in 2007, an increase of 10 per cent on a per share basis. Comparable earnings⁽¹⁾ per share increased approximately eight per cent to $2.25 per share.

Funds generated from operations⁽¹⁾ increased substantially, to a record $3 billion. That represents a 15 per cent increase over 2007 and is nearly three times as large as our funds generated from operations⁽¹⁾ in 1999.

Our long term shareholders will recall that TransCanada established a new strategic direction in 2000, shedding international assets, exiting the volatile midstream business and focusing our efforts on pipeline and power generation opportunities within North America. In 2001 we further reduced our exposure to commodity price volatility by selling our natural gas marketing and trading business.

Since 1999 TransCanada has invested approximately $24 billion in stable, value-creating pipeline and energy growth opportunities. Those investments have transformed TransCanada: today we are the unquestioned leader in North American natural gas transmission; we are building a large and very competitive oil pipeline business; we are one of North America's largest and most profitable natural gas storage operators; and we own the largest and most profitable private-sector power business in Canada.

Our investments have been both large and profitable. Since 1999 our comparable earnings⁽¹⁾ per share have grown at a compound average annual rate of nine per cent, from $1.08 in 1999 to $2.25 in 2008. Over that same period we generated significant additional earnings and cash proceeds from the sale of non-core assets and certain other items. These transactions funded a significant portion of our capital program over the past nine years.

TransCanada's strong financial performance has enabled our Board of Directors to increase our dividend on common shares in each of the past nine years. Most recently, we increased our dividend to $1.52 per share on an annualized basis, an increase of six percent over 2008. Our Board of Directors also approved an increase in the discount on the issuance of common shares from treasury under our Dividend Reinvestment and Share Purchase Plan from two to three per cent. This provides existing shareholders with an opportunity to participate in the future growth of the company by reinvesting their dividends in additional common shares.

Our natural gas pipeline business achieved excellent results in 2008. Each day we deliver approximately 20 per cent of the natural gas consumed in North America, and we continue to build on that industry-leading position. We are currently investing more than $1.5 billion to expand and extend our Alberta System. We have asked Canada's National Energy Board to assume jurisdiction over the Alberta System, a move that will enable TransCanada to compete for new natural gas supplies in British Columbia, the Northwest Territories and Alaska. We are excited by the prospects for shale gas development in northeastern British Columbia and we look forward to extending our system to serve producers in the Montney and Horn River shale plays.

We continue to build a large scale, profitable natural gas pipeline business in the United States. Our 2007 acquisition of the ANR System has proven to be both profitable and well-timed. Rockies volumes have filled the southwest leg of ANR, and the emerging Haynesville and Fayetteville shale plays are expected to contribute significant volumes to the southeast leg in the years ahead. ANR's large natural gas storage business in Michigan has grown significantly since acquisition, and we see significant capital investment opportunities throughout the ANR System in the years ahead. Notably, we now have a strong commercial and business development team in Houston, Texas, improving our access to natural gas pipeline opportunities in the United States.

Our efforts to bring Mackenzie and Alaska gas to market continue to move forward. These large, long term projects will connect more than 4 Bcf/d to our Alberta System, providing shippers with unparalleled access to premium North American markets through our GTN, Northern Border, Great Lakes and Canadian Mainline systems.

Five years ago we identified the opportunity to move growing volumes of crude oil from Alberta's oilsands to major United States refining centres in the southern Midwest and Gulf Coast regions. Construction is well underway on our Keystone pipeline from Hardisty, Alberta to Wood River and Patoka, Illinois, with flows commencing in early 2010. We are currently finalizing regulatory applications for the Keystone expansion, which will extend our reach to premium markets in the Gulf Coast region. Both Keystone and the Gulf Coast expansion are underpinned by long-term contracts to move more than 900,000 barrels per day.

Our power generation business has grown more than tenfold over the past nine years, and projects currently under construction will deliver significant growth in cash flow and earnings over the next three years. The 550 MW Portlands Energy Centre in Toronto is expected to be in service in first quarter 2009. The 683 MW Halton Hills Generating Station located west of Toronto is expected to be in service in third quarter 2010. The 1,500 MW refurbishment of Bruce A Units 1 and 2 is also expected to come on line in 2010. Other projects now under construction or in development include the Cartier and Kibby Wind projects and the Coolidge Generating Station. These large-scale generating projects are highly efficient, located in premium markets, and underpinned by strong, long-term commercial arrangements.

Energy infrastructure is a long-cycle, capital intensive business, and we structure our projects carefully to ensure stable profitability throughout the cycle. With a strong balance sheet and significant liquidity, TransCanada has the ability to endure turbulent economic times, today and in the future. Our strong cash flows from existing assets together with continued access to capital markets means we are well positioned to fund our sizeable capital program and deliver growing cash flow and earnings in the years ahead.

TransCanada's enduring success is a reflection of the skills and commitment of our outstanding team of 4,000 employees located in Calgary, Houston and many other regions across North America. Our employees truly are our competitive advantage. Their operating and commercial expertise, their project development and execution capabilities and their dedication to value creation are unparalleled in the energy infrastructure industry. I am confident that we will continue to deliver significant shareholder value for many years to come.

Hal Kvisle
President and Chief Executive Officer