Other Income Statement Items

Other Income Statement Items

Interest Expense

Year ended December 31 (millions of dollars)
  2009  2008  2007 
Interest on long-term debt(1) 1,285  1,038  991 
Other interest and amortization 27  46  20 
Capitalized interest (358) (141) (68)
  954  943  943 
(1) Includes interest for Junior Subordinated Notes

Interest expense in 2009 increased $11 million to $954 million from $943 million in each of 2008 and 2007. The increase in interest on long-term debt reflected new debt issues of US$1.5 billion and $500 million in August 2008, US$2.0 billion in January 2009 and $700 million in February 2009. In addition, U.S. dollar-denominated interest expense increased in 2009 due to the impact of a stronger U.S. dollar. These increases were partially offset by higher capitalization of interest to finance the Company's larger capital spending program primarily due to the construction of Keystone and the acquisition in 2009 of the remaining ownership interest in Keystone from ConocoPhillips. Interest expense in 2009 was positively impacted by reduced losses from changes in the fair value of derivatives used to manage TransCanada's exposure to fluctuating interest rates. Interest expense in 2008 of $943 million was consistent with 2007. Higher financial charges resulting from financing the Company's 2008 capital program, including the Ravenswood acquisition, and higher losses from changes in the fair value of derivatives used to manage the Company's exposure to rising interest rates were offset by increased capitalization of interest to finance the Company's larger capital spending program.

Interest income and other was $121 million in 2009 compared to $54 million and $120 million in 2008 and 2007, respectively. The increase of $67 million in 2009 compared to 2008 was primarily due to the positive impact of a weakening U.S. dollar throughout 2009 on U.S. dollar working capital balances and higher gains from derivatives used to manage the Company's exposure to foreign exchange rate fluctuations. An increase in interest income due to higher cash balances held in 2009 than in 2008 was more than offset by lower interest rates. The decrease of $66 million in 2008 compared to 2007 was primarily due to lower gains from derivatives used to manage the Company's exposure to foreign exchange rate fluctuations and the negative impact of a strengthening U.S. dollar throughout 2008.

Income taxes were $387 million, $602 million and $490 million in 2009, 2008 and 2007, respectively. The decrease of $215 million in 2009 compared to 2008 was primarily due to reduced pre-tax earnings, higher income tax savings from income tax rate differentials and other positive income tax adjustments in 2009, including $30 million of favourable adjustments arising from a reduction in the Province of Ontario's corporate income tax rates. The increase in income tax expense of $112 million in 2008 compared to 2007 was primarily due to positive income tax adjustments recorded in 2007 and higher pre-tax earnings in 2008.

Non-controlling interests were $96 million in 2009 compared to $130 million and $97 million in 2008 and 2007, respectively. The decrease in 2009 compared to 2008 was primarily due to the non-controlling interests' portion of Portland's Calpine bankruptcy settlements in 2008, partially offset by higher PipeLines LP earnings and the impact of a stronger U.S. dollar in 2009. The increase in 2008 compared to 2007 was primarily due to the non-controlling interests' portion of Portland's Calpine bankruptcy settlements in 2008.