Notes to Consolidated Financial Statements

1. Description of TransCanada's Business
2. Accounting Policies
3. Accounting Changes
4. Segmented Information
5. Plant, Property and Equipment
6. Goodwill
7. Rate-Regulated Businesses
8. Joint Venture Investments
9. Intangibles and Other Assets
10. Notes Payable
11. Deferred Amounts
12. Income Taxes
13. Long-Term Debt
14. Long-Term Debt of Joint Ventures
15. Junior Subordinated Notes
16. Non-Controlling Interests
17. Common Shares
18. Preferred Shares
19. Asset Retirement Obligations
20. Employee Future Benefits
21. Risk Management and Financial Instruments
22. Changes in Operating Working Capital
23. Acquisitions and Dispositions
24. Commitments, Contingencies and Guarantees
25. United States Accounting Principles and Reporting

Note 1: Description of TransCanada's Business

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TransCanada Corporation (TransCanada or the Company) is a leading North American energy company which operates in three business segments, Natural Gas Pipelines, Oil Pipelines and Energy, each of which offers different products and services.

Natural Gas Pipelines

The Natural Gas Pipelines segment consists of the Company's investments in regulated natural gas pipelines and regulated natural gas storage facilities. Through its Natural Gas Pipelines segment, TransCanada owns and operates:

  • a natural gas transmission system extending from the Alberta/Saskatchewan border east into Québec (Canadian Mainline);
  • a natural gas transmission system in Alberta and northeastern British Columbia (B.C.) (Alberta System);
  • a natural gas transmission system extending from producing fields primarily located in Texas, Oklahoma, the Gulf of Mexico and Louisiana to markets primarily located in Wisconsin, Michigan, Illinois, Ohio and Indiana, and to regulated natural gas storage facilities in Michigan (ANR);
  • a natural gas transmission system extending from central Alberta to the B.C./Idaho border and to the Saskatchewan/Montana border (Foothills);
  • natural gas transmission systems in Alberta that supply natural gas to the oil sands region of northern Alberta and to a petrochemical complex at Joffre, Alberta (Ventures LP);
  • a natural gas transmission system in Mexico extending from Naranjos, Veracruz to Tamazunchale, San Luis Potosi (Tamazunchale); and
  • a natural gas transmission system in Mexico extending from Manzanillo, Colima to Guadalajara, Jalisco (Guadalajara).

Through its Natural Gas Pipelines segment, TransCanada operates and has ownership interests in natural gas pipeline systems as follows:

  • a 53.6 per cent direct ownership interest in a natural gas transmission system that connects to the Canadian Mainline and serves markets in eastern Canada and the northeastern and midwestern United States (U.S.) (Great Lakes);
  • a 75 per cent direct ownership interest in a natural gas transmission system extending from the B.C./Idaho border to the Oregon/California border (GTN);
  • a 75 per cent direct ownership interest in a natural gas transmission system extending from the Powder River Basin in Wyoming to Northern Border in North Dakota (Bison);
  • a 61.7 per cent interest in a natural gas transmission system that extends from a point near East Hereford, Québec, to the northeastern U.S. (Portland);
  • a 50 per cent interest in a natural gas transmission system that connects with the Canadian Mainline near the Québec/Ontario border and transports natural gas to markets in Québec and to the Portland system (TQM); and
  • a 33.3 per cent controlling interest in TC PipeLines, LP, which has the following ownership interests in pipelines operated by TransCanada:
    • a 46.4 per cent interest in Great Lakes, in which TransCanada has a combined 69 per cent effective ownership interest through TC PipeLines, LP and a direct interest described above;
    • a 50 per cent interest in a natural gas transmission system extending from a point near Monchy, Saskatchewan, to the U.S. Midwest (Northern Border), in which TransCanada has a 16.7 per cent effective ownership interest through TC PipeLines, LP;
    • a 25 per cent interest in GTN, in which TransCanada has a combined 83.3 per cent effective ownership interest through TC PipeLines, LP and a direct interest described above;
    • a 25 per cent interest in Bison, in which TransCanada has a combined 83.3 per cent effective ownership interest through TC PipeLines, LP and a direct interest described above;
    • a 100 per cent interest in a natural gas transmission system extending from Arizona to Baja California at the Mexico/California border (North Baja), in which TransCanada has a 33.3 per cent effective ownership interest through TC PipeLines, LP; and
    • a 100 per cent interest in a natural gas transmission system extending from Malin, Oregon, to Wadsworth, Nevada (Tuscarora), in which TransCanada has a 33.3 per cent effective ownership interest through TC PipeLines, LP.

TransCanada does not operate but has ownership interests in natural gas pipelines and natural gas marketing activities as follows:

  • a 44.5 per cent interest in a natural gas transmission system that connects with the Canadian Mainline near Waddington, New York, and delivers natural gas to customers in the northeastern U.S. (Iroquois);
  • a 46.5 per cent interest in a natural gas transmission system extending from Mariquita to Cali in Colombia (TransGas); and
  • a 30 per cent interest in a natural gas transmission system extending from Loma de la Lata, Argentina to Concepción, Chile (Gas Pacifico), and in an industrial natural gas marketing company based in Concepción (INNERGY).

Oil Pipelines

The Oil Pipelines segment consists of a wholly owned and operated crude oil pipeline system extending from Hardisty, Alberta to U.S. markets at Wood River and Patoka in Illinois (Wood River/Patoka), and from Steele City, Nebraska to Cushing, Oklahoma (Cushing Extension). The Company plans to expand and extend this oil pipeline system to the U.S. Gulf Coast (Keystone XL) which includes the construction of a new crude oil pipeline from Cushing, Oklahoma to the U.S. Gulf Coast, the addition of operational storage facilities at Hardisty, Alberta and the construction of a new crude oil pipeline from Hardisty, Alberta to Steele City, Nebraska. The expanded oil pipeline system is collectively referred to as Keystone.

The proposed Marketlink projects will connect additional oil supply sourced from U.S. basins to facilities which form part of Keystone XL and provide transportation services accessing refining markets in the Cushing, Oklahoma region and the U.S. Gulf Coast. The proposed Bakken Marketlink project would transport U.S. crude oil from Baker, Montana to Cushing and the proposed Cushing Marketlink project would transport crude oil from Cushing to Port Arthur and Houston, Texas.

Energy

The Energy segment primarily consists of the Company's investments in electrical power generation plants and non-regulated natural gas storage facilities. Through its Energy segment, the Company owns and operates:

  • a natural gas and oil-fired generating facility in Queens, New York, consisting of multiple units employing steam turbine, combined-cycle and combustion turbine technology (Ravenswood);
  • a natural gas-fired, combined-cycle power plant in Halton Hills, Ontario (Halton Hills);
  • hydroelectric generation assets located in New Hampshire, Vermont and Massachusetts (TC Hydro);
  • a natural gas-fired peaking facility located near Phoenix, Arizona (Coolidge);
  • a natural gas-fired, combined-cycle plant in Burrillville, Rhode Island (Ocean State Power);
  • a natural gas-fired cogeneration plant near Trois-Rivières, Québec (Bécancour);
  • natural gas-fired cogeneration plants in Alberta at Carseland, Redwater, Bear Creek and MacKay River;
  • a wind farm located in Kibby and Skinner townships in northwestern Franklin County, Maine (Kibby Wind);
  • a natural gas-fired cogeneration plant near Saint John, New Brunswick (Grandview);
  • a waste-heat fuelled power plant and the Cancarb thermal carbon black facility in Medicine Hat, Alberta (Cancarb);
  • a natural gas storage facility near Edson, Alberta (Edson); and
  • a 60 per cent interest in an underground natural gas storage facility near Crossfield, Alberta (CrossAlta).

TransCanada does not operate but has ownership interests in power generation plants as follows:

  • a 48.8 per cent partnership interest and a 31.6 per cent partnership interest in the nuclear power generation facilities of Bruce A and Bruce B (collectively Bruce Power), respectively, located near Tiverton, Ontario;
  • a 62 per cent interest in the Baie-des-Sables, Anse-à-Valleau, Carleton, Montagne-Sèche and Gros-Morne wind farms in Gaspé, Québec (Cartier Wind). All wind farms are in service with the exception of the second phase of Gros-Morne, which is currently under construction; and
  • a 50 per cent interest in a natural gas-fired, combined-cycle plant in Toronto, Ontario (Portlands Energy).

TransCanada also has long-term power purchase arrangements (PPA) in place for:

  • 756 megawatts (MW) of generating capacity from the Sheerness power facility near Hanna, Alberta;
  • a 50 per cent interest in ASTC Power Partnership, which has a PPA in place for 100 per cent of the production from the Sundance B power facilities near Wabamun, Alberta; and
  • 100 per cent of the production of the Sundance A power facilities near Wabamun, Alberta.