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RNS Number:0976S
TransCanada Pipelines Ld
01 March 2007
PART 2
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Report on Executive Compensation
The following is the Human Resources Committee (the "Committee") Report on
Executive Compensation which outlines the policies of the Committee for
determining compensation of TCPL's Presidents, Executive Vice-Presidents and the
CEO (collectively, the "Executives").
Committee Information
COMPOSITION OF THE COMMITTEE
The Committee is composed of four directors, K.L. Hawkins (chair), W.K. Dobson,
E.L. Draper, and D.P. O'Brien, all of whom are independent, as required by
securities regulations. There are no interlocking relationships between the
members of the Committee or between any member of the Committee and any of
TCPL's current Executives. The Committee reports to the Board on all material
matters considered, recommended or approved by the Committee.
For further information on the composition and mandate of the Committee please
refer to Schedule "D" "Description of Board Committees and their Charters -
Human Resources Committee". For further information on the independence of the
Committee members please refer to "Schedule "B" - Disclosure of Corporate
Governance Practices - Board of Directors".
COMMITTEE PROCESSES
The Committee recognizes the importance of maintaining sound governance
practices for the development and administration of executive compensation and
benefit programs, and has instituted processes that enhance the Committee's
ability to effectively carry out its responsibilities. Examples of process steps
that the Committee uses include:
*
Holding in-camera sessions without Company management present prior to
and following every regularly scheduled Committee meeting;
*
Hiring independent consultants and advisors and requiring their
attendance at specific Committee meetings;
*
Annually approving a Committee checklist that sets out the timetable of
all regularly occurring accountabilities and that provides context for
the discussion of related items;
*
Using a two step review process where most recurring items are provided
for the Committee's initial review at a meeting prior to the approval
meeting;
*
Conducting annual reviews of detailed compensation tally sheets and
modelled compensation outcomes for the Executives;
*
Granting of the vast majority of stock options once per year during the
concurrent annual deliberation of Total Direct Compensation for the
Executives; and
*
Transparent disclosure of compensation policies and actions.
The Committee directs management to gather information on its behalf, and
provide initial analysis and commentary. The Committee reviews this material
along with other information received from external advisors in its
deliberations
TRANSCANADA PIPELINES LIMITED 29
before considering and/or rendering decisions. The Committee has full discretion
to adopt management recommendations or to alter them and to consult its own
external advisors.
INDEPENDENT ADVICE
The Committee engages its own consultants, and from time-to-time legal advisors,
independent of those used by management, to gather information and deliver
opinions and advice on various subjects including executive compensation,
securities law and compensation disclosure practices.
Executive Compensation Advisory Services
The Committee engaged the services of an individual consultant (the
"Consultant") from Towers Perrin to provide executive compensation consulting
services to the Committee during 2006. The mandate of the Consultant was to
provide an assessment of management's proposals relating to the compensation of
the Executives. In 2006, the Consultant provided services to the Committee in
accordance with this mandate and attended portions of some Committee meetings,
as requested by the chair of the Committee. The fees paid to Towers Perrin in
2006 for the Consultant's services to the Committee were approximately $78,000.
The performance of the Consultant is reviewed and their engagement is approved
by the Committee on an annual basis.
Under the mandate, the Consultant could also provide advice to management on
significant changes to compensation philosophy or programs, or other
compensation matters of the Company if the work was directed or approved by the
chair of the Committee. These additional services were not provided by the
Consultant to TCPL in 2006. In 2006, other separate consultants from Towers
Perrin did provide the Company with non-executive compensation, Board
compensation, benefit and pension actuarial consulting services and the fees
paid for these services were approximately $1.9 million. All service fees and
related expenses paid to Towers Perrin, including those for the services of the
Consultant, are reviewed by the Committee.
Executive Compensation Program
COMPENSATION PHILOSOPHY
The design of TCPL's Executive Compensation Program is based on a compensation
philosophy that:
*
supports employee attraction, engagement and retention;
*
is competitive with the external compensation market;
*
aligns executive interests with shareholders and customers; and
*
rewards accomplishments through "pay-for-performance".
The Executive Compensation Program specifically provides for Total Direct
Compensation ("TDC") which is a combination of base salary and performance-based
incentives that reflect competitive pay in light of business achievement,
fulfillment of individual objectives and overall job performance. The Committee
approves, or recommends for approval, all remuneration to be awarded through the
Executive Compensation Program.
DETERMINING INDIVIDUAL EXECUTIVE COMPENSATION
Context for Decisions
All compensation awarded annually to the Executives under the following plans is
considered for each individual and approved by the Committee or, in the case of
the CEO, recommended by the Committee to the Board for approval. The Committee
approves or recommends the compensation awards, which are not contingent on the
number, term or current value of other outstanding compensation previously
awarded to the individual. However, the Committee is provided with summaries of
the three-year history of awarded compensation, which is intended to provide
further context for its annual decision-making.
30 TRANSCANADA PIPELINES LIMITED
During 2006, organizational restructuring resulted in significant changes in
TCPL's Executive Leadership Team. These changes were effective June 1, 2006 and
included, among others, the following changes:
*
Mr. Girling, previously Executive Vice-President ("EVP"), Corporate
Development and Chief Financial Officer ("CFO"), was appointed to the
new role of President, Pipelines, reporting to Mr. Kvisle, President and
Chief Executive Officer. Mr. Girling has overall accountability for
TCPL's pipeline businesses, including gas and oil pipelines in Canada,
the U.S. and Mexico.
*
Mr. Pourbaix, previously EVP, Power, was appointed to the new role of
President, Energy, reporting to Mr. Kvisle. Mr. Pourbaix has overall
accountability for TCPL's power, gas storage and liquefied natural gas,
as well as other non-regulated businesses.
*
Mr. Lohnes was appointed EVP and CFO, reporting to Mr. Kvisle. Mr.
Lohnes was President and Chief Executive Officer of Great Lakes Gas
Transmission Company, which was 50 per cent owned by TCPL.
As a result of these changes, the Committee was asked to make mid-year
adjustments to compensation for the executives which were based on material
differences in role accountabilities and responsibilities.
Program Funding
The Committee is cognizant of the impact of Executive compensation on TCPL's
cash flow and stock dilution levels, and endeavors to manage these overall costs
in a just and prudent manner. In 2006, the Committee looked at potential methods
for hedging the cost of some cash-settled incentive plans where share price
exposure is present. After reviewing the benefits and costs of such activities,
the Committee decided to continue to maintain the budgeted accrual process for
funding of these plans.
Market Competitiveness
As one factor in the decision-making process, the Committee considers market
compensation data provided by various external compensation sources. This data
consists of summary compensation information from selected Canadian-based
companies that are generally of similar size and scope to TCPL, and represent
the market in which TCPL may compete for talent (the "Comparator Group").
TRANSCANADA PIPELINES LIMITED 31
The composition of the Comparator Group is reviewed annually by the Committee
for its on-going business relevance to TCPL. An overview of the 2005
characteristics of the Comparator Group, as compared to TCPL, is provided in the
following table:
TCPL Comparator Group
Industry North American Pipelines, Canadian Oil and Gas, Pipelines,
Power Power, Utilities
Location Calgary Principally Alberta
Median 75th Percentile
Revenue(1) $ 6.1 billion $ 4.8 billion $10.2 billion
Market $15.7 billion $23.9 billion $34.9 billion
Capitalization(2)
Assets(1) $24.1 billion $9.5 billion $15.7 billion
Employees(1) Approximately 2,400 2,319 4,166
(1)
Revenue, assets and number of employees reflect 2005 information.
(2)
Market Capitalization is calculated as at October, 2006.
Pay for Performance
Awarding Compensation
When awarding annual compensation to the Executives, the Committee considers
actual performance and results achieved against annual corporate and individual
performance objectives. The annual TDC an Executive is awarded will vary in
accordance with the following guidelines:
If Actual Performance... TDC will be...
Meets objectives / satisfactory = Comparable to the median of the Comparator Group
Exceeds objectives / above satisfactory = Comparable to above-median compensation(1)
Falls short of objectives / below satisfactory = Adjusted downward from the previous year(2)
(1)
The degree to which an Executive is compensated above the median is relative
to his or her performance level.
(2)
The degree to which the pay is adjusted downward is relative to individual
performance. However, the adjustment is typically made through variable and
not fixed compensation.
2006 Corporate Performance
TCPL sets annual corporate objectives directed at achieving the results required
to deliver on TCPL's key longer-term strategies for growth and value creation.
Below is a summary of the performance categories and highlights of results
achieved in 2006.
Performance Category Examples of Performance Highlights of Results Achieved in 2006
Measures
Financial * Earnings per share * Strong financial performance in 2006 including:
performance * Funds generated from * Excluding gains on asset sales, earnings per share
operations from operations of $2.12 ($2.15 less gains of $0.03). This
* Total Shareholder Return was a significant increase to the comparable earnings per
share in 2005 of $1.75 ($2.49 less gains of $0.74).
* Funds generated from operations increased
significantly from 2005.
32 TRANSCANADA PIPELINES LIMITED
Performance Category Examples of Performance Highlights of Results Achieved in 2006
Measures
Operational * Costs * Managed capital projects to budget despite labour market
excellence * Environment pressures.
* Safety * Delivered significant value from improved asset
management.
* Achieved productivity gains.
* Improved safety performance; results continue to compare
favourably to industry benchmarks.
* Continued outstanding performance on pipeline customer
satisfaction and service, as reflected in both internal and
external customer satisfaction surveys.
Maximize * Stakeholder relationships * Continued to build strong relationships with regulators,
TransCanada's * Corporate reputation governments, customers and other stakeholders critical to
competitive strength * Organizational and people TCPL's success.
and enduring value strengths * Named again to the Dow Jones Sustainability Index in 2006.
* Financial capacity and * Recognized for corporate governance practices in external
flexibility rankings.
* Excellence in * Maintained strong financial capacity and credit ratings in
value-creating strategy, Canada and the U.S. which has allowed the Company to complete
analysis and investment large transactions.
execution * Named to the Global 100 - a list of the world's top 100
most sustainable corporations initiated by Corporate Knights
Inc. in partnership with Innovest Strategic Value Advisors
Inc.
Grow and maximize * Progress on longer-term * Long-term negotiated settlements on Northern Border
long-term value of value adding initiatives Pipeline and Tuscarora Gas Transmission.
Pipeline and Energy * Greenfield projects * Continuing progress on longer-term initiatives including
businesses * Completed acquisitions liquefied natural gas opportunities, northern gas pipeline
development, Bruce Power "A" restart.
* Greenfield initiatives - the Portlands Energy Centre and
Halton Hills Generating Station progressed to the
construction phase. Significant progress on Keystone oil
pipeline project. Tamazanchale Mexican pipeline in service.
* TransCanada and/or TC PipeLines, LP entered into
agreements for acquisitions - ANR Pipeline; ANR Storage; 50%
interest in Great Lakes Gas Transmission; 50% interest in
Tuscarora Gas Transmission; and 20% interest in Northern
Border Pipeline. TransCanada will become operator of all four
pipelines.
To assess results achieved against corporate objectives, where appropriate, the
Committee looks at both absolute and relative performance against specific peer
companies. The Committee is of the view that both relative and absolute measures
are required to give a balanced perspective of achievement of objectives.
The Committee and the Board were of the opinion that TCPL's 2006 performance
delivered results that exceeded objectives in the areas of financial performance
and growth and above satisfactory results on other notable objectives. Based on
this corporate performance achievement and the assessment of individual
performance, the Committee decided to award above-median TDC for Executives.
VALUE OF AWARDED COMPENSATION
While annual compensation awards made to the Executives are based on current
year corporate and individual performance, the ultimate value from longer-term
components of the TDC awards is linked to, and dependent upon, TCPL's ability to
replicate and sustain annual performance over the longer term.
TRANSCANADA PIPELINES LIMITED 33
To ensure that the Company's longer-term compensation programs are effective in
delivering on this intent, in 2006 the Committee reviewed modeled compensation
scenarios for the Executives that illustrated the impact of various future
corporate performance outcomes on previously awarded and outstanding
compensation. The Committee found that the intended relationship between pay and
performance was appropriate for all of the Executives, and that, in aggregate,
the resulting compensation modeled under various performance scenarios was
reasonable, not excessive, and delivered the intended differentiation of
compensation value based on performance.
Components of Total Direct Compensation
TCPL's TDC is structured with an emphasis on variable compensation. This places
most of the Executive's compensation at risk where the value ultimately received
by the Executive is contingent on meeting or exceeding performance requirements.
Disclosure of the actual components of TDC for the CEO, the Chief Financial
Officer and the three other most highly compensated executive officers based on
salary and bonus value earned and received during the 2006 financial year
(collectively, the "Named Executive Officers") is noted under the heading,
"Executive Compensation Program - Elements of the Executive Compensation
Program" below.
Executive Compensation Program
ELEMENTS OF THE EXECUTIVE COMPENSATION PROGRAM
In 2006, the Executive Compensation Program consisted of four direct
compensation elements: base salary, short-term annual cash incentives,
performance share units issued under the mid-term incentive plan and stock
options issued under the long-term incentive plan. The following table provides
an overview of these elements.
Component of Type of Average 2006 Element Form Plan Performance
TDC Compensation Pay Mix(1) Period
FIXED Annual 26% Base Salary Cash "Base Pay 1 year
of TDC Program"
Annual 31% Short-term Cash "Incentive 1 year
of TDC Incentive Compensation
Program"
VARIABLE Longer-term 25% Medium-term Share Units "Executive Share Up to 3 years
of TDC Incentive Unit Plan" with vesting at
end of term
19% Long-term Stock "Stock Option Vesting 33 1/3%
of TDC Incentive Options Plan" each year for 3
years with a 7
year term
(1)
Pay Mix is the resulting relative value of each pay element following the
determination of TDC. It is expressed as an aggregate average percentage of
TDC for the Named Executive Officers. The relative value of TDC allocated to
specific forms of variable compensation for individual Executives is aligned
with the Executive's ability to contribute to short, medium and long-term
business results based on the Committee's assessment.
34 TRANSCANADA PIPELINES LIMITED
OVERVIEW OF EXECUTIVE COMPENSATION ELEMENTS
Fixed Compensation
Base Pay Program
The Base Pay Program provides a fixed level of income based on the market value
of a role. In accordance with TCPL's market-based compensation practices, all
Executive roles are individually matched to similar roles in the Comparator
Group. Base salaries are typically targeted at the median of the market and are
reviewed annually. Variance from the median could occur on the basis of
individual performance or material differences in an Executive's
responsibilities versus the market comparator role. Changes in base pay are
typically effective April 1st.
Variable Compensation - Annual
For Executives, the Committee has intentionally moved away from a formulaically
driven variable compensation program to a program based on sound judgment and
discretion at the Board and Committee levels. The Committee is of the view that
formulas and weightings applied to forward-looking objectives may lead to
unintended consequences for compensation purposes. For this reason, there are no
pre-established weightings applied to measures or formulaic calculations used to
determine payments for Executives from TCPL's performance-based annual variable
compensation program. The Committee's comprehensive assessment of overall
business performance of TCPL, including corporate performance against stated
objectives, business circumstances and, where appropriate, relative performance
against peers, provides the context for individual Executive evaluations for
annual variable compensation payments.
Incentive Compensation Program
Short-term incentives are awarded through the Incentive Compensation Program
(the "IC Program"). The IC Program provides for the opportunity to receive
annual cash payments based on individual performance measured against
pre-established annual business and individual objectives, within the context of
overall corporate performance.
Corporate performance provides the baseline from which individual assessments
are made. The actual incentive awards for the Executives are based on the
Committee's subjective and discretionary assessment of the Executive's
contribution to the corporate results based on his or her achievement against
individual objectives. The awards are provided under the pay-for-performance
guidelines noted above. Payments from the IC Program are made in the first
quarter following the completion of the financial year.
Variable Compensation - Longer-Term
The total value of longer-term incentive compensation ("Total LTI Value")
granted each year is established as part of an Executive's overall
performance-based TDC. Total LTI Value is derived from the established TDC value
minus Total Cash (from Base Pay and actual awards from the IC program).
Once the Total LTI Value has been established by the Committee, the value is
then divided between the Executive Share Unit Plan (the "ESU Plan") and the
Stock Option Plan. The Committee determines the actual division of Total LTI
Value in a given year at its discretion and takes into account a number of
factors including:
*
consideration of the funding requirements for awards from both plans;
*
the individual plan designs and each Executive's ability to impact
medium and longer-term performance outcomes; and
*
the valuation of grants.
The actual value of granted stock options cannot be determined until the date
of grant. At the time of granting, the Committee grants a set number of stock
options that it believes reflect the intended dollar value to be awarded based
on an economic valuation done prior to granting. Once the final economic value
of stock options is known, the actual value ultimately granted via the ESU Plan
may be adjusted. This adjustment is necessary to reconcile the cumulative
longer-term value actually granted via the two plans to the Total LTI Value that
is determined by the Committee (as part of the TDC deliberation).
TRANSCANADA PIPELINES LIMITED 35
Under this approach the Total LTI Value could potentially be different year
over year based on performance or operational considerations. As a result, the
number of ESU units and stock options granted each year may also vary. In recent
years, approximately 70% to 80% of the Total LTI Value has been awarded through
the ESU Plan and 20% to 30% through the Stock Option Plan.
Executive Share Unit Plan
Medium-term incentives are granted through the ESU Plan. The purpose of this
plan is to align a considerable portion of each participant's compensation with
medium-term performance objectives that support the interests of shareholders
and other stakeholders. These performance objectives play a key role in the
company's strategy for growth and sustainability. Participants in this plan
include all executive and senior management employees of TCPL.
Under the ESU Plan, participants receive a provisional grant of units that is
based on the allocated award value from Total LTI divided by the price of
TransCanada's common shares at the time of grant. Vesting of the grants is
subject to the attainment of specific business performance objectives set by the
Committee at the time of grant. Throughout the three-year term of the grant,
participants are credited with additional value from dividends declared and paid
to TransCanada's shareholders.
At the end of the grant term, actual results are compared against the
performance objectives and participant unit totals are adjusted based on this
assessment. The resulting total vested units are then valued based on the price
of TransCanada's common shares at the time of vesting. Participants receive a
cash payment, less statutory withholdings, for their total settlement value.
In 2006, participants received a grant of units that was valued based on the
weighted average closing price for TransCanada's common shares on the TSX for
the five trading days prior to and including the grant date. The Committee
established specific objectives for threshold, target and maximum performance
levels, the achievement of which will adjust payment amounts as follows:
Performance Level Unit Total Adjustment
Below threshold = zero units vest; no payment is made
At threshold = 50% of units vest for payment
At target = 100% of units vest for payment
At or above maximum = 150% of units vest for payment
The performance criteria which need to be met for the vesting of the 2006 grant
consist of:
1.
TransCanada's absolute total shareholder return ("TSR");
2.
TransCanada's relative TSR as compared to specified companies with which
TransCanada may compete for capital (the "ESU Peer Group"); and
3.
Corporate financial measures of earnings per share and funds generated from
operations.
The Committee establishes performance criteria that cover a full range of
performance outcomes including the potential for a zero payout. There are no
pre-established weightings applied to these measures nor are there formulaic
calculations used to create the performance achievement for the plan. The
Committee uses its judgment and discretion to assess overall performance in
light of the stated criteria and business circumstances surrounding the
performance achieved.
If the actual performance achievement is determined by the Committee to align
at a point between threshold and target, or target and maximum levels, the
Committee will determine the number of units that vest on a pro-rata basis. The
formula to determine the value of the vested units is based on the weighted
average closing price of TransCanada's common shares on the TSX during the five
trading days immediately prior to and including the vesting date.
For the purposes of executive compensation disclosure, grants under the ESU
Plan are reported as long term incentives in this AIF.
36 TRANSCANADA PIPELINES LIMITED
Stock Option Plan
Long-term incentives are granted to the Executives through the Stock Option
Plan. This plan aligns the Executives' interests with the longer term growth and
profitability of TransCanada, ultimately enhancing shareholder value.
Participants benefit only if the market value of TransCanada's common shares at
the time of stock option exercise is greater than the market value of such
shares at the time of grant. Only executive-level employees received grants from
the Stock Option Plan in 2006.
The exercise price of a stock option is set as the volume weighted average
trading price on the TSX during the five trading days immediately prior to the
grant date. Stock options granted in 2006 vest 331/3% on each anniversary of the
grant date for a period of three years. Vested stock options from this grant may
be exercised until their expiry, which is seven years from the grant date.
Share Ownership Guidelines
The Committee believes that executives can more effectively represent the
interests of shareholders if they have a significant investment in the common
shares of TransCanada, or their economic equivalent. The Committee is of the
opinion that executives should hold an interest in TransCanada in order to align
their financial interests with those of shareholders. In January 2003, all of
the Executives and certain additional executive and senior-level employees of
the Company were given guidelines to achieve an interest level that the
Committee viewed as significant in relation to each employee's base salary.
The level of ownership could be achieved by direct purchase of common shares,
by participation in the TransCanada Dividend Reinvestment Plan or through
unvested units granted under the ESU Plan. In June 2006, the Committee approved
an amendment to the current Share Ownership Guidelines (the "Guidelines") to
require that at least 50% of the ownership level be TransCanada common shares or
units of any TransCanada sponsored limited partnership. Unvested Executive Share
Units ("ESUs") would only count to a maximum of 50% of the ownership level.
Executives and other employees included under the guidelines have until the end
of 2010 to meet this new standard.
The Committee receives regular updates on Executive ownership levels and
compliance with the guidelines. The following table sets out the Guideline
ownership levels for the Named Executive Officers based on their base salary
rate as of December 31, 2006 and the 20-day weighted average closing price of
TransCanada's common shares at year end which was $39.92.
Named Executive Minimum Ownership Minimum Guideline Actual Guideline Multiple of Base
Officer Requirement(1) Ownership Value ($) Ownership Value as Salary Rate
at December 31,
2006 ($)(2)
H.N. Kvisle 3 times base salary 3,300,000 3,695,421 3.36
G.A. Lohnes(3) 2 times base salary 680,000 357,645 1.05
R.K. Girling 2 times base salary 1,040,000 1,014,529 1.95
A.J. Pourbaix 2 times base salary 1,040,000 677,245 1.30
D.M. Wishart 2 times base salary 800,000 1,613,688 4.03
(1)
Other senior employees of TransCanada have a minimum ownership requirement
of one times base salary.
(2)
Under the Guidelines, the value from unvested Executive Share Units (ESUs)
is counted only to a maximum of 50% of the ownership requirement.
(3)
Mr. Lohnes became an Executive Vice-President in June 2006 at which time his
ownership requirement under the Guidelines was increased from one times base
salary to two times base salary.
TRANSCANADA PIPELINES LIMITED 37
Changes Made to the Executive Compensation Program
The following section provides information regarding recent design or practice
changes that have been made to plans in TCPL's Executive Compensation program.
These changes impact compensation values disclosed as compensation for the Named
Executive Officers in the noted tables contained under the heading "Executive
Compensation" below.
ESU PLAN
A review of the ESU Plan design was undertaken in 2004 to further enhance its
alignment to TCPL's compensation philosophy. As a result of this review, changes
were approved by the Committee and implemented commencing with the 2005 grant.
ESU grants awarded in 2004 were made under the previous design and payments from
those vested grants are reported in the "Summary Compensation Table" below.
The key differences between the previous and current designs include the
expansion of the performance levels and the recalibration of performance
objectives as set out below.
Below Threshold Threshold Target Maximum
Previous Zero payout Requires stretch but Very difficult stretch N/A
Plan achievable performance; performance
Design 50% of granted units requirements;
(for 2004 payout 100% granted units
grants) payout
Current Plan Zero payout Requires acceptable Requires stretch but Very difficult stretch
Design performance; achievable performance; performance
(for 2005 50% of granted units 100% granted units requirements;
grants payout payout 150% granted units
onward) payout
With the previous plan design, there was a significant risk of grant forfeiture
due to the difficulty of the performance requirements at both the threshold and
target levels. Grants were made with lower nominal values (i.e., more units) in
recognition of this significant risk. The current plan design provides for
recognition of both satisfactory and excellent performance without the
requirement for higher nominal grant values to deliver the same intended level
of competitive compensation over the longer term.
Previously, the share price used to value units was the closing price on the
TSX on the grant date. Starting with the 2005 grant, the share price used to
value the units at the time of grant reflects the weighted average closing price
for TransCanada's common shares on the TSX for the five trading days prior to
and including the grant date. The change was made to align the grant valuation
process with the payout valuation process.
Inactive Executive Compensation Plan
The following section provides information pertaining to the executive
compensation plan under which grants or awards are no longer made. However,
outstanding grants or awards from this noted plan continue to be disclosed as
compensation for the Named Executive Officers in the various tables contained
under the heading "Executive Compensation" below.
PERFORMANCE UNIT PLAN
The Performance Unit Plan (the "PUP") was established in 1995 and included
participants in the executive and senior management employee groups. In July
2002, the Committee amended the plan so that, starting in 2003, no further
grants would be made under the PUP but accruals on existing grants will continue
until the last grants expire in 2012, if not redeemed prior to this date.
Until 2003, one unit from the PUP ("PUP Unit") was granted in tandem with each
stock option granted under the Stock Option Plan. Each PUP Unit is eligible for
an annual cash accrual up to the total value of dividends paid on one common
share in the preceding financial year. The accrual is made if TransCanada's TSR
is equal to or greater than the
38 TRANSCANADA PIPELINES LIMITED
average TSR of other specified Canadian companies with which TransCanada
competes for capital (the "PUP Peer Group"). The Committee has full discretion
to award the full or a lesser accrual value if TransCanada's absolute TSR is
below that of the PUP Peer Group average.
PUP Units vest three years after the grant date and are considered to be
automatically redeemed on the tenth anniversary of the grant date. Once vested,
a PUP Unit may be exercised for the dollar value accrued on the unit at any time
and prior to the tenth anniversary of the grant. However, the vested PUP Unit
may only be exercised if the stock option granted in tandem with the PUP Unit is
concurrently exercised, or has been previously exercised. If the underlying
stock option is exercised before the PUP unit is vested, the PUP Unit is
forfeited.
Compensation of the President and Chief Executive Officer
The components of TDC for the CEO are the same as those for the other
Executives. Annually, the Committee makes recommendations to the Board regarding
the CEO's compensation based on the same market-based, performance-related basis
as for the other Executives.
OVERVIEW OF PERFORMANCE
The Committee assesses the performance of the CEO on the basis of achievement
against personal and corporate performance objectives approved by the Committee
at the beginning of the year, as well as his overall contribution to the success
of the Company. In 2006, Mr. Kvisle's personal objective focused on the
following areas:
Achievement of Corporate Objectives
The Board has reviewed TCPL's financial and non-financial results for 2006, and
assessed that the Company has met or exceeded all of the stated performance
objectives, and that Mr. Kvisle played a key role in achieving these outcomes.
The following highlights some of Mr. Kvisle's key accomplishments.
Value Creation
Mr. Kvisle provided strong support to the organization as it worked to maximize
the long-term value and grow its existing businesses. The acquisition of the ANR
pipeline is expected to generate accretive earnings in the Pipelines business.
The purchase of additional interests in Northern Border Pipeline, Tuscarora Gas
Transmission and Great Lakes Gas Transmission in expected to enhance the
profitability and cash generation for TC PipeLines, LP. The Company commissioned
the Tamazunchale Pipeline in 2006, and moved both the Portlands Energy Centre
and Halton Hills Generating Station through to the construction phase.
Significant progress was made on gaining the necessary approvals for the
Keystone oil pipeline project.
Mr. Kvisle also played a pivotal role in the continuing progress on longer-term
initiatives including liquefied natural gas opportunities, northern gas pipeline
development, and the Bruce Power restart.
Creating a Strong Management Team
Under Mr. Kvisle's guidance, the Company undertook a major organizational
restructuring in 2006. Formation of the Pipelines and Energy business units
created clear accountability for the profitability of those businesses. In
addition, key succession plans were implemented, positioning the Company for
continued strong leadership in the future.
Building Relationships
Mr. Kvisle continued to personally contribute to building long term winning
relationships with key stakeholders, including shareholders, customers,
governments, regulators and First Nations, all of whom are critical to the
success of TCPL's strategies.
Operational Excellence
Mr. Kvisle continued to lead the Company in its efforts to manage costs, provide
outstanding customer service, and achieve superior health, safety and the
environmental standards. The Company's actual operating and administrative costs
were under budget, and both internal and external customer surveys produced very
positive results.
TRANSCANADA PIPELINES LIMITED 39
Investor Confidence
The Company's disciplined, consistent strategy continued to deliver strong
financial results under Mr. Kvisle's leadership. As a result the Board increased
the dividend in 2006 from $1.22 to $1.28. This contributed to an increase in
TransCanada's share price from $36.65 at the end of 2005 to $40.61 at December
31, 2006.
Corporate Governance and Reputation
Mr. Kvisle plays a key role in ensuring TCPL adheres to best practices in
corporate governance and maintaining the Company's excellent reputation. The
Company was again recognized externally in 2006 for its governance practices,
social responsibility and community investment.
SUMMARY OF PERFORMANCE
The Committee assessed Mr. Kvisle's results and concluded that his performance
exceeded his individual objectives in 2006 and made this recommendation to the
Board.
The Board is of the view that Mr. Kvisle's overall achievements and performance
exceeded his individual objectives in 2006, resulting in his TDC being
positioned at above median TDC for similar roles in the Comparator Group. In
making this determination, the Board considered the achievement of the Company
and Mr. Kvisle's individual objectives (both financial and non financial) as
well as significant economic, industrial and market circumstances that
influenced the performance of TCPL.
Committee Summary
The Committee is satisfied that TCPL's current Executive Compensation Program
reflects competitive market practice and the levels of compensation delivered
under this program are aligned with the company's performance. The Committee
fully understands and supports the implications of awarded compensation. The
Committee will continue to monitor market conditions and modify TCPL's Executive
Compensation Program, if required, to ensure it remains competitive and aligned
with TCPL's compensation philosophy.
This Report on Executive Compensation is submitted on behalf of the voting
members of the Human Resources Committee of the Board:
K.L. Hawkins (Chair) D.P O'Brien
W.K. Dobson E.L. Draper
40 TRANSCANADA PIPELINES LIMITED
Performance Graph
The following chart compares the five-year cumulative total shareholder return
on the TransCanada (formerly TCPL) common shares to the S&P/TSX composite index
(assuming reinvestment of dividends and considering a $100 investment in common
shares on December 31, 2001).
,G253374.JPG
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Compound
2001 2002 2003 2004 2005 2006 Annual Growth
TransCanada 100.0 120.5 153.1 170.6 217.9 250.3 20.1%
TSX 100.0 87.6 111.0 127.0 157.7 184.9 13.1%
Remuneration of Executive Officers of TCPL
The Executives also serve as executive officers of TCPL. An aggregate
remuneration is paid for serving as an executive of TransCanada and for service
as an executive officer of TCPL. Since TransCanada does not hold any assets
directly other than the common shares of TCPL and receivables from certain of
TCC's subsidiaries, all executive employee costs are assumed by TCPL according
to a management services agreement between the two companies.
Executive Compensation
All compensation values disclosed in this section, unless otherwise noted, are
expressed in Canadian dollars and are derived from compensation plans and
programs that are described in detail under the section "Report on Executive
Compensation" or from retirement arrangements reported under the section
"Pension and Retirement Benefits".
TRANSCANADA PIPELINES LIMITED 41
Summary Compensation Table
The following table outlines the summary of compensation earned in the 2006,
2005 and 2004 financial years by the Named Executive Officers.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
Awards Payouts
Year Salary(5) Bonus(6) Other Annual Securities Shares or LTIP All Other
Name and Principal (b) ($) ($) Compensation Under Units Payouts
Compensation
Position of the (c) (d) (7) Options Subject to (9) (10)
Named Executive ($) Granted(8) Resale ($) ($)
Officers (e) (#) Restriction (h) (i)
(a) (f) ($)
(g)
H.N. Kvisle 2006 1,100,004 1,500,000 - 250,000 - 2,980,971 11,000
President and 2005 1,050,003 1,300,000 - 160,000 - 1,852,433 10,417
Chief Executive 2004 871,251 1,100,000 165,000 - - 8,665
Officer
G.A. Lohnes 2006 (1) 331,973 320,000 266,013 64,000 - 345,000 11,786
Executive 2005 (2) 318,914 208,240 62,077 20,000 - 254,562 9,167
Vice-President 2004 (2) 345,605 161,173 84,844 12,000 - - 9,296
and Chief
Financial Officer
R.K. Girling 2006 (3) 498,346 700,000 - 190,000 - 1,192,429 28,192
President, 2005 460,032 500,000 - 60,000 - 740,973 25,600
Pipelines 2004 457,524 460,000 60,000 - - 25,571
A.J. Pourbaix 2006 (4) 494,172 700,000 - 190,000 - 1,064,734 71,065
President, Energy 2005 440,001 500,000 - 60,000 - 740,973 49,691
2004 407,505 450,000 60,000 - - 46,148
D.M. Wishart 2006 395,007 500,000 - 55,000 - 877,367 24,942
Executive 2005 372,504 400,000 - 40,000 - 370,487 3,713
Vice-President, 2004 335,004 330,000 40,000 - - 3,325
Operations and
Engineering
(1)
Mr. Lohnes was appointed Executive Vice-President and Chief Financial
Officer for TCPL in June 2006 and continued in his role as President of
Great Lakes Gas Transmission Company ("Great Lakes") until September 1,
2006. As such, the values denoted for the 2006 financial year represent
compensation earned in this position for a four month period, combined with
compensation earned for eight months in his previous position as President
and Chief Executive Officer of Great Lakes.
(2)
These values reflect the compensation Mr. Lohnes received during his tenure
as President and Chief Executive Officer of Great Lakes. Mr. Lohnes became
President and CEO in August 2000 and during his term, Great Lakes was a
pipeline joint venture owned 50/50 by TransCanada and El Paso Corporation.
The values denoted were provided to Mr. Lohnes in U.S. dollars (or
equivalent value) but have been expressed here in Canadian dollars based on
the Bank of Canada's average annual exchange rate for the financial year
noted, namely 1.2116 for 2006, 1.3015 for 2005, and 1.4015 for 2004.
(3)
Mr. Girling was appointed President, Pipelines in June 2006. As such, values
denoted for the 2006 financial year represent compensation earned in this
position for a seven month period, combined with compensation earned for
five months in his previous position as Executive Vice-President, Corporate
Development and Chief Financial Officer.
(4)
Mr. Pourbaix was appointed President, Energy in June 2006. As such, values
denoted for the 2006 financial year represent compensation earned in this
position for a seven month period, combined with compensation earned for
five months in his previous position as Executive Vice-President, Power.
(5)
This column reflects actual base salary earnings during the noted financial
year. Salary adjustments are typically effective April 1.
(6)
Amounts referred to in this table as "Bonus" are paid pursuant to the IC
Program and attributable to the noted financial year. Payments from the IC
Program are made in the first quarter following the completion of the
financial year.
(7)
This column includes payments made to Mr. Lohnes for tax equalization on
exercised stock options of US$124,842 for 2006, US$47,697 for 2005 and
US$60,538 for 2004. The aforementioned payments are disclosed here in
Canadian dollars based on the Bank of Canada's average annual exchange rate
for the financial year noted, namely 1.2116 for 2006, 1.3015 for 2005, and
1.4015 for 2004. As part of his repatriation to Canada, Mr. Lohnes also
received a one-time special tax-protected bonus payment of $200,000. This
value will be paid to Mr. Lohnes in annual installments of $70,000 in 2006,
$65,000 in 2007 and $65,000 in 2008. The first installment disclosed for
2006 includes $44,754 of tax reimbursement.
The value of perquisites for each Named Executive Officer is less than
$50,000 and 10% of total annual salary and bonus for the financial year and,
as such, is not included. For information, the average annual value for
perquisites provided to the Named Executive Officers in 2006 was $32,378 and
included such things as car allowance or lease and the associated
maintenance fees, Company paid parking, luncheon and/or recreation club
memberships and financial counseling/tax preparation.
(8)
This column shows the total number of stock options granted under the Stock
Option Plan to each of the Named Executive Officers during each of the
financial years noted. Due to the corporate restructuring in June 2006 there
was a special grant made to certain Named Executive Officers that was in
addition to those granted during the annual determination of TDC in
February. Specifically, Mr. Lohnes received an additional 50,000 options,
Mr. Girling and Mr. Pourbaix each received an additional 100,000 options.
Further disclosure on these grants is found under the heading "Equity
Compensation Plan Tables" below.
42 TRANSCANADA PIPELINES LIMITED
(9)
LTIP Payouts represent the value of the payments made or to be made for the
proportion of ESU units granted in 2004 that vested and became eligible for
payout in 2006. There were no payouts made under the PUP to the Named
Executive Officers in 2006.
(10)
The amounts in this column include payments made to the Named Executive
Officers by subsidiaries and affiliates of TransCanada (including directors'
fees paid by affiliates and amounts paid for serving on management
committees of entities in which TransCanada holds an interest),
specifically: Mr. Girling - $23,250 for 2006 and $21,000 for both 2005 and
2004; Mr. Pourbaix - $59,250 for 2006 and $39,000 for both 2005 and 2004;
Mr. Wishart - $21,000 for 2006.
This column also includes the value of salary paid in lieu of vacation based
on the election of the Named Executive Officer and the value of TCPL's
contributions under the Employee Stock Savings Plan made on behalf of the
Named Executive Officer for the noted financial year.
Long-Term Incentive Plan Tables
2006 ESU PLAN GRANTS
The following table outlines the grants made under the ESU Plan that were
approved in February 2006. These grants are still unvested and outstanding as at
December 31, 2006 and have therefore not yet been recorded as LTIP Payouts in
the Summary Compensation Table, column (h), above.
Estimated Future Payouts Under
Performance or Non-Securities-Price-Based Plans (units)(2)
Name Securities, Other Period Below Threshold Target Maximum
Units or Until Maturation Threshold (#) (#) (#)
Other Rights or Payout (#)
(1)
(#)
H.N. Kvisle 52,391 Dec. 31, 2008 0 26,195 52,391 78,586
G.A. Lohnes 3,401 Dec. 31, 2008 0 1,701 3,401 5,102
R.K. Girling 16,893 Dec. 31, 2008 0 8,447 16,893 25,340
A.J. Pourbaix 16,893 Dec. 31, 2008 0 8,447 16,893 25,340
D.M. Wishart 8,958 Dec. 31, 2008 0 4,479 8,958 13,436
(1)
This is the grant of units under the ESU Plan.
(2)
Does not include the units related to reinvested dividend value.
2005 ESU PLAN GRANTS
The following table outlines the grants made under the ESU Plan that were
approved in February 2005. These grants are still unvested and outstanding as at
December 31, 2006 and therefore have not yet been recorded as LTIP Payouts in
the Summary Compensation Table, column (h), above.
Estimated Future Payouts Under
Performance or Non-Securities-Price-Based Plans (units)(2)
Name Securities, Other Period Below Threshold Target Maximum
Units or Until Maturation Threshold (#) (#) (#)
Other Rights or Payout (#)
(1)
(#)
H.N. Kvisle 65,320 Dec. 31, 2007 0 32,660 65,320 97,980
G.A. Lohnes 4,441 Dec. 31, 2007 0 2,221 4,441 6,662
R.K. Girling 18,349 Dec. 31, 2007 0 9,175 18,349 27,524
A.J. Pourbaix 15,657 Dec. 31, 2007 0 7,828 15,657 23,485
D.M. Wishart 12,458 Dec. 31, 2007 0 6,229 12,458 18,687
(1)
This is the grant of units under the ESU Plan.
(2)
Does not include the units related to reinvested dividend value.
TRANSCANADA PIPELINES LIMITED 43
2004 ESU PLAN GRANTS
The following table outlines the ESU Plan grants that were made in 2004 and
vested in 2006. The table reconciles the value that was paid to the Named
Executive Officers which is disclosed under LTIP Payouts in the Summary
Compensation Table, column (h) above.
Name Securities, Performance or Vested Vested Value Vested Value Total
Units or Other Period Units From Grants From Settlement
Other Rights Until Maturation From (3) Dividends(4) (5)
(1) or Payout Grants(2) ($) ($) ($)
(#) (#)
H.N. Kvisle 73,185 Dec. 31, 2006 65,867 2,664,300 316,671 2,980,971
G.A. Lohnes 8,470 Dec. 31, 2006 7,623 308,350 36,650 345,000
R.K. Girling 29,275 Dec. 31, 2006 26,348 1,065,756 126,673 1,192,429
A.J. Pourbaix 26,140 Dec. 31, 2006 23,526 951,627 113,107 1,064,734
D.M. Wishart 21,540 Dec. 31, 2006 19,386 784,164 93,203 877,367
(1)
This is the grant of units under the ESU Plan that is used to determine
vesting. The range of units that are eligible to vest under this grant are
between 50% and 100%, based on performance between Threshold and Target, or
0% if Threshold performance is not met.
(2)
Based on the Committee's assessment of the performance achieved against
objectives, 90% of the granted units vested for settlement. This number does
not include units related to reinvested dividends.
(3)
Vested units were valued at $40.45 per unit based on the five day weighted
closing price of common share on the TSX at December 31, 2006.
(4)
The additional value related to the accrued value from declared dividends
and paid relative to the vested unit total.
(5)
Includes both the Vested Value from Grant and Vested Value from Dividends.
This settlement value is reported as an LTIP Payout in the Summary
Compensation Table, column (h) above.
SUPPLEMENTAL DISCLOSURE - 2007 ESU PLAN GRANTS
Decisions regarding ESU Plan grants are made annually by the Committee in
February prior to the publication of the Proxy Circular. Although not a
requirement, TCPL discloses these compensation grants for the Named Executive
Officers. The following table outlines the grants under the ESU Plan made in
2007.
Estimated Future Payouts Under
Performance or Non-Securities-Price-Based Plans (units)(2)
Name Securities, Other Period Below Threshold Target Maximum
Units or Until Threshold (#) (#) (#)
Other Maturation or (#)
Rights(1) Payout
(#)
H.N. Kvisle 58,405 Dec. 31, 2009 0 29,203 58,405 87,608
G.A. Lohnes 10,383 Dec. 31, 2009 0 5,192 10,383 15,575
R.K. Girling 30,964 Dec. 31, 2009 0 15,482 30,964 46,446
A.J. Pourbaix 30,964 Dec. 31, 2009 0 15,482 30,964 46,446
D.M. Wishart 18,541 Dec. 31, 2009 0 9,271 18,541 27,812
(1)
This is the grant of units under the ESU Plan.
(2)
Does not include units related to reinvested dividend value.
44 TRANSCANADA PIPELINES LIMITED
PUP GRANTS OUTSTANDING
The following table outlines PUP grants made to the Named Executive Officers.
The estimated future payouts set out in the table include all accruals up to and
including the accrual approved for the most recently completely financial year.
Estimated Future Payouts Under
Performance or Non-Securities-Price-Based Plans(3)
Name Securities, Other Period Below Threshold(4) Maximum(4) Settlement
Units or Until Maturation ($) ($) Value for
Other Rights or Payout(2) 2006(5)
(1) ($)
(#)
H.N. Kvisle 150,000 25-Feb-12 0 811,350 -
100,000 20-Mar-11 0 630,900 -
42,500 27-Feb-11 0 268,133 -
55,000 28-Feb-10 0 395,395 -
50,000 01-Feb-10 0 359,450 -
90,000 01-Sep-09 0 647,010 -
G.A. Lohnes 20,000 25-Feb-12 0 108,180 -
17,500 27-Feb-11 0 110,408 -
17,500 28-Feb-10 0 125,808 -
22,016 9-Dec-07 0 184,912 -
R.K. Girling 65,000 25-Feb-12 0 351,585 -
45,000 27-Feb-11 0 283,905 -
45,000 28-Feb-10 0 323,505 -
50,000 01-Feb-10 0 359,450 -
20,000 29-Jul-09 0 143,780 -
25,000 01-Mar-09 0 179,725 -
25,000 03-Dec-08 0 179,725 -
25,162 09-Dec-07 0 211,336 -
A.J. Pourbaix 65,000 25-Feb-12 0 351,585 -
35,000 27-Feb-11 0 220,815 -
20,000 28-Feb-10 0 143,780 -
20,000 01-Feb-10 0 143,780 -
20,000 01-Mar-09 0 143,780 -
17,500 03-Dec-08 0 125,808 -
D.M. Wishart 30,000 25-Feb-12 0 162,270 -
35,000 27-Feb-11 0 220,815 -
20,000 28-Feb-10 0 143,780 -
20,000 01-Feb-10 0 143,780 -
20,000 01-Mar-09 0 143,780 -
25,162 09-Dec-07 0 211,336 -
(1)
As no further awards will be made under the PUP, it will be phased out over
the remaining life of the outstanding units.
(2)
The exercise period for all PUP Units commences upon vesting, which is the
third anniversary of the grant date, and expires on the tenth anniversary of
the grant date, with the exception of the PUP Units maturing on February 1,
2010. These Units were granted under a one time special performance
incentive program which vested on February 22, 2002.
(3)
The Committee determined in January 2007 that $1.27 per outstanding PUP Unit
will accrue for 2006 in respect of the grants made from December 5, 1996 to
February 25, 2002.
TRANSCANADA PIPELINES LIMITED 45
(4)
The Company is no longer including the "Threshold" and "Target" columns
since the values reported were equal to the ones noted here in the "Maximum"
column. Once the accrued value is approved by the Committee and assigned to
each outstanding PUP Unit, no further variance of future value may be
applied. However, the plan does provide for a risk of zero value payments
from the plan should the exercise provision in the plan not be met.
(5)
Values contained in this column are amounts received during the current
financial year following the exercise of vested PUP Units. A blank ("-")
denotes that there were no Units exercised from the grant. A zero value
denotes that all PUP Units from the grant were forfeited. When applicable,
settlement values are also reported as LTIP Payouts in column (h) of the
Summary Compensation Table, above.
Equity Compensation Plan Tables
2006 STOCK OPTION PLAN GRANT
The following table outlines the grants made under the Stock Option Plan to each
of the Named Executive Officers during the 2006 financial year.
Name Date of Number of % of Exercise Price Market Value of Expiration
Grant Common Total ($/common share)(2) Common Shares Date
Shares Options Underlying
Under Granted to Options on the
Options Employees Date of Grant
Granted(1) in 2006 ($/common share)
H.N. Kvisle 27-Feb-06 250,000 13.58% 35.23 35.23 27-Feb-13
G.A. Lohnes 12-Jun-06 50,000 2.72% 33.08 32.70 12-Jun-13
27-Feb-06 14,000 0.76% 35.23 35.23 27-Feb-13
R.K. Girling 12-Jun-06 100,000 5.43% 33.08 32.70 12-Jun-13
27-Feb-06 90,000 4.89% 35.23 35.23 27-Feb-13
A.J. 12-Jun-06 100,000 5.43% 33.08 32.70 12-Jun-13
Pourbaix
27-Feb-06 90,000 4.89% 35.23 35.23 27-Feb-13
D.M. Wishart 27-Feb-06 55,000 2.99% 35.23 35.23 27-Feb-13
(1)
On each anniversary date of the grant for a period of three years, one-third
of these options vest and are exercisable.
(2)
The exercise price is equal to the greater of the closing price of common
shares on the grant date and the weighted average closing price of common
shares on the TSX during the five trading days immediately prior to the
grant date of the stock options.
AGGREGATE STOCK OPTION EXERCISES DURING 2006 AND 2006 YEAR-END STOCK OPTION
VALUES
The following table provides information relating to options exercised and the
number or value of options outstanding as at December 31, 2006 for each of the
Named Executive Officers.
Unexercised Options at December Value of Unexercised
Common Aggregate 31, 2006 in-the-Money Options at
Shares Value (#) December 31, 2006(1)
Acquired on Realized ($)
Exercise ($)
Name (#) Exercisable Unexercisable Exercisable Unexercisable
H.N. Kvisle 100,000 1,551,454 555,833 411,667 9,568,163 3,223,937
G.A. Lohnes 30,500 365,062 4,167 81,333 43,837 647,123
R.K. Girling 0 0 205,000 250,000 3,469,900 1,933,200
A.J. Pourbaix 80,000 1,017,273 97,500 250,000 1,472,200 1,933,200
D.M. Wishart 0 0 190,162 95,000 3,408,018 759,899
(1)
The value of unexercised "in-the-money" stock options at December 31, 2006
is the difference between the exercise price and the closing price of $40.61
per share of a common share on the TSX on December 31, 2006. The underlying
stock options have not been and will not necessarily be exercised and the
actual gains, if any, on exercise will depend on the value of common shares
on the date of exercise.
46 TRANSCANADA PIPELINES LIMITED
SUPPLEMENTAL DISCLOSURE - 2007 STOCK OPTION PLAN GRANTS
Decisions regarding stock option grants are made annually by the Committee in
February prior to the publication of the Proxy Circular. Although not a
requirement, TCPL discloses these compensation grants for the Named Executive
Officers. The following table outlines the stock option grants under the Stock
Option Plan made in 2007.
Name Date of Number of % of Exercise Price Market Value of Expiration
Grant Common Total ($/common share)(3) Common Shares Date
Shares Options Underlying
Under Granted to Options on the
Options Employees Date of Grant(3)
Granted(1) in 2007(2) ($/common share)
H.N. Kvisle 22-Feb-07 202,442 18.69% 38.10 38.10 22-Feb-14
G.A. Lohnes 22-Feb-07 35,990 3.32% 38.10 38.10 22-Feb-14
R.K. Girling 22-Feb-07 107,326 9.91% 38.10 38.10 22-Feb-14
A.J. 22-Feb-07 107,326 9.91% 38.10 38.10 22-Feb-14
Pourbaix
D.M. Wishart 22-Feb-07 64,267 5.93% 38.10 38.10 22-Feb-14
(1)
On each anniversary date of the grant for a period of three years, one-third
of these stock options vest and are exercisable.
(2)
Based on total stock options granted as at February 22, 2007.
(3)
Equal to the volume weighted average trading price of common shares on the
TSX during the five trading days immediately prior to the grant date of the
stock options.
Equity Compensation Plan Information
Stock Option Plan
The Stock Option Plan is the only compensation plan under which equity
securities of TransCanada have been authorized for issuance. Stock options may
be granted to such employees of TCPL as the Human Resources Committee may from
time to time determine. Starting in 2005, the Committee determined that only
executive-level employees will participate in the plan.
On recommendation of the Human Resources Committee, the Board has approved
various amendments to the Stock Option Plan, some of which are subject to
shareholder approval at TransCanada's Annual and Special Meeting. The following
provides key information regarding the Stock Option Plan provisions:
*
The plan was first approved by shareholders in 1995;
*
Shareholders are being asked at the Meeting to approve an increase in
the number of shares issuable under the Stock Option Plan by 4,500,000;
*
If the Option Plan Resolution is approved, a maximum of 30,500,000 of
TransCanada's common shares may be issued under the plan; this
represents 5.8% of common shares issued and outstanding as at February
22, 2007;
*
As at February 22, 2007, there were approximately:
*
9,610,839 common shares issuable upon the exercise of outstanding stock
options; this represents 1.8% of issued and outstanding common shares;
*
486,096 common shares remaining available for issuance; this represents
0.9% of issued and outstanding common shares;
*
15,903,065 common shares have been issued upon the exercise of stock
options, representing 3.0% of issued and outstanding common shares of
the Company; and
*
the exercise price for unexercised issued stock options ranges from $10.03
to $38.10, with expiry dates ranging from October 31, 2007 to February 22,
2014.
TRANSCANADA PIPELINES LIMITED 47
Under the terms of the Stock Option Plan, the maximum number of common shares
reserved for issuance as stock options to any one participant in any fiscal year
cannot exceed 20% of the total number of options granted in that fiscal year and
the number of common shares that may be reserved for issuance to insiders, or
issued within any one year period, under all of TransCanada's security based
compensation arrangements cannot exceed 10% of TransCanada's issued and
outstanding common shares. There are no restrictions on the number of stock
options that may be granted to insiders, subject to the foregoing limitations.
Stock options cannot be transferred or assigned by participants other than a
personal representative being permitted to exercise stock options in the case of
death of a participant or if a participant is unable to mange his or her
affairs.
Stock options granted as of 2003 onward vest as to one-third on each
anniversary of the grant date for a period of three years and have a seven year
term. The exercise price of a stock option is equal to the volume weighted
average trading price of a common share on the TSX during the five trading days
immediately prior to the grant date of the stock options.
The following table outlines the action prescribed for grants under the Stock
Option Plan. Unless a stock option expires earlier, as outlined below, stock
options expire on the seventh anniversary of the date of the grant.
Event Action
Death All outstanding stock options vest and become exercisable as at the date of death and may
be exercised no later than the first anniversary of the date of death.
Resignation The participant may exercise outstanding vested and exercisable stock options no later
than six months after the last day of active employment, after which date all outstanding
stock options are forfeited.
Retirement All outstanding stock options vest and become exercisable as at the date of retirement and
the participant may exercise these, and all other vested and exercisable stock options no
later than three years past the date of retirement.
Termination without cause The participant may exercise outstanding vested and exercisable stock options no later
than the later of the last day of the notice period and six months after the last day of
active employment, after which date all outstanding stock options are forfeited. No
options vest during the notice period.
Termination for cause The participant may exercise outstanding vested and exercisable stock options no later
than six months after the last day of active employment, after which date all outstanding
stock options are forfeited.
Securities Authorized for Issuance under Equity Compensation Plans
The following table outlines the number of common shares to be issued upon the
exercise of outstanding stock options under the Stock Option Plan, the
weighted-average exercise price of the outstanding stock options, and the number
of common shares available for future issuance under the Stock Option Plan, all
as at December 31, 2006.
Plan Category Number of securities to Weighted-average Number of securities
be issued upon exercise exercise price of remaining available for
of outstanding options outstanding options future issuance under
(a) (b) equity compensation plans
(excluding securities
reflected in column (a))
(c)
Equity compensation plans 8,798,920 $25.37 1,567,560
approved by security holders
Equity compensation plans not Nil Nil Nil
approved by security holders
TOTAL 8,798,920 $25.37 1,567,560
48 TRANSCANADA PIPELINES LIMITED
Pension and Retirement Benefits for Executives
Pension and Retirement Benefits
TCPL's Canadian pension plans are designed to attract and retain employees for
the long term and to provide employees with a lifetime annual retirement income.
Base Pension Plan
All TCPL Canadian employees participate in the TCPL Registered Pension Plan,
which is now solely a non-contributory defined benefit pension plan.
The normal retirement age under the Registered Pension Plan is age 60 or any
age between 55 and 60 where the sum of an employee's age and continuous service
equals 85. Employees are eligible to retire prior to their normal retirement
date, but the benefit payable is subject to early retirement reduction factors.
The defined benefit plan is integrated with Canada Pension Plan benefits. The
benefit calculation is:
1.25% of an employee's Highest Average Earnings(1) up to the Final Average(2)
YMPE(3)
plus
1.75% of an employee's Highest Average Earnings above the Final Average YMPE
multiplied by
the employee's years of credited service in the Registered Pension Plan
("Credited Pensionable Service")
(1)
"Highest Average Earnings" means the average of an employee's best
consecutive 36 months of Pensionable Earnings in the last 15 years before
retirement. "Pensionable Earnings" means an employee's base salary plus
actual Incentive Compensation paid up to a targeted percentage or for
executive employees (as defined in the plan) a fixed percentage of their
base salary, as provided in the plan. Pensionable Earnings do not include
overtime, shift and premium differentials or any other forms of
compensation.
(2)
"Final Average YMPE" means the average of the YMPE in effect for the latest
calendar year from which earnings are included in an employee's highest
earnings calculation plus the two previous years.
(3)
"YMPE" means Year's Maximum Pensionable Earnings under the Canada/Quebec
Pension Plan.
Registered defined benefit pension plans are subject to a maximum annual
benefit accrual under the Income Tax Act (Canada), which is currently $2,222 for
each year of Credited Pensionable Service, with the result that benefits cannot
be earned in the Registered Pension Plan on compensation above approximately
$139,000 per annum.
Supplemental Pension Plan
All TCPL employees with pensionable earnings over the Income Tax Act (Canada)
ceiling of $139,000, including the Named Executive Officers, participate in the
Company's non-contributory defined benefit Supplemental Pension Plan.
Approximately 477 TCPL employees currently participate in the Supplemental
Pension Plan.
The Registered Pension Plan and Supplemental Pension Plan were amended at
January 1, 2007 to change from an earnings maximum approach, where the earnings
are capped each year based on the maximum annual benefit accrual under the
Income Tax Act (Canada), to a hold harmless approach, where the maximum amount
allowable under the Income Tax Act (Canada) will be paid from the Registered
Pension Plan and the remainder is paid from the Supplemental Pension Plan. The
overall benefit remains the same.
The Supplemental Pension Plan is funded through a retirement compensation
arrangement under the Income Tax Act (Canada). Subject to the Board's approval,
contributions to the fund are based on an annual actuarial valuation of the
Supplemental Pension Plan obligations calculated on the basis of the plan
terminating at the beginning of each calendar year.
The annual pension benefit under the Supplemental Pension Plan is equal to
1.75% multiplied by the employee's Credited Pensionable Service multiplied by
the amount by which such employee's Highest Average Earnings exceed the ceiling
imposed under the Income Tax Act (Canada) and is recognized under the Registered
Pension Plan.
TRANSCANADA PIPELINES LIMITED 49
Generally, neither the Registered Pension Plan nor the Supplemental Pension
Plan provide for the recognition of past service. However, the Committee may,
under the provisions of the Supplemental Pension Plan, at its sole discretion,
grant additional years of credited service to executive employees.
Under the Registered Pension Plan and the Supplemental Pension Plan, TCPL
employees, including the Named Executive Officers, will receive the following
normal form of pension:
(a)
in respect of credited service prior to January 1, 1990, upon
retirement, a monthly pension payable for life with 60% continuing
thereafter to the participant's designated joint annuitant; and
(b)
in respect of credited service on and after January 1, 1990, upon
retirement, a monthly pension as described in (a) above and, for
unmarried participants, a monthly pension payable for life with payments
to the participant's estate guaranteed for the balance of 10 years if
the participant dies within 10 years of retirement.
In lieu of the normal form of pension, optional forms of pension payment may be
chosen provided that any legally required waivers are completed.
The following table sets out the estimated annual defined benefit plan benefits
(based on the "joint and 60% survivor" method) payable for credited service
under the Registered Pension Plan and the Supplemental Pension Plan (excluding
amounts payable under the Canada Pension Plan) for employees with the following
Highest Average Earnings and Credited Pensionable Service. The benefits listed
in the table are not subject to any deduction for social security or other
offset amounts such as Canada Pension Plan or the Quebec Pension Plan.
Years of Credited Pensionable Service
Highest Average
Earnings 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years
$ 400,000 $68,000 $102,000 $136,000 $170,000 $204,000 $238,000
600,000 103,000 154,000 206,000 257,000 309,000 360,000
800,000 138,000 207,000 276,000 345,000 414,000 483,000
1,000,000 173,000 259,000 346,000 432,000 519,000 605,000
1,200,000 208,000 312,000 416,000 520,000 624,000 728,000
1,400,000 243,000 364,000 486,000 607,000 729,000 850,000
1,600,000 278,000 417,000 556,000 695,000 834,000 973,000
1,800,000 313,000 469,000 626,000 782,000 939,000 1,095,000
2,000,000 348,000 522,000 696,000 870,000 1,044,000 1,218,000
2,200,000 383,000 574,000 766,000 957,000 1,149,000 1,340,000
2,400,000 418,000 627,000 836,000 1,045,000 1,254,000 1,463,000
2,600,000 453,000 679,000 906,000 1,132,000 1,359,000 1,585,000
2,800,000 488,000 732,000 976,000 1,220,000 1,464,000 1,708,000
Based on their current Highest Average Earnings and assuming the Named
Executive Officers remain employed by TCPL until age 60 and that the Registered
Pension Plan and Supplemental Pension Plan remain in force substantially in
their
50 TRANSCANADA PIPELINES LIMITED
present form, the Named Executive Officers will have the number of years of
credited pensionable service and benefit payable set out below under their
names.
H.N. Kvisle(1) G.A. Lohnes(2) R.K. Girling(3) A.J. Pourbaix D.M. Wishart
(3)
Years of Credited Service 14.33 13.33 8.00 8.00 9.59
to December 31, 2006
Accrued Pension at $461,000 $76,000 $103,000 $95,000 $93,000
December 31, 2006 and
Payable at age 60
Years of Credited Service 23.16 22.92 26.50 29.58 17.50
to age 60
Annual Benefit Payable at $748,000 $131,000 $334,000 $347,000 $169,000
age 60
(1)
In 2002, the Human Resources Committee approved an arrangement with Mr.
Kvisle to grant him additional credited pensionable service. The arrangement
resulted in him receiving five years of additional credited pensionable
service in 2004 on his fifth anniversary date with TransCanada. In addition,
for each year after 2004, until and including 2009, Mr. Kvisle will be
granted one additional year of credited pensionable service on the date of
the anniversary of his employment. All such additional service will not
exceed ten additional years of credited pensionable service and is to be
recognized solely in the Supplemental Pension Plan with respect to earnings
in excess of the maximum set under the Income Tax Act (Canada).
(2)
Mr. Lohnes continued to accrue credited service in the Canadian Registered
Pension Plan and Supplemental Pension Plan while employed in the USA from
August 16, 2000 to August 31, 2006. Pensionable earnings were established on
the basis that one U.S. dollar is equal to one Canadian dollar, and included
both the U.S. Base Salary and Incentive Compensation Payment at Target.
(3)
In 2004, the Human Resources Committee also approved arrangements for Mr.
Girling and Mr. Pourbaix to obtain additional credited pensionable service.
Subject to Mr. Girling and Mr. Pourbaix maintaining continuous employment
with TransCanada until September 8, 2007, each will receive an additional
three years of credited pensionable service on that date which are to be
recognized solely in the Supplemental Pension Plan with respect to earnings
in excess of the maximum set under the Income Tax Act (Canada).
Fiscal 2006 Pension Expense Related to Service and Compensation
Amounts reported in the table below represent the pension expense related to
services provided in the 2006 year for each of the Named Executive Officers
under both the Registered Pension Plan and the Supplemental Pension Plan
including the impact of differences between actual compensation paid in 2006 and
the actuarial assumptions used for the year.
Name Fiscal 2006 pension expense related
to service and compensation
H.N. Kvisle $713,000
G.A. Lohnes $626,000
R.K. Girling $384,000
A.J. Pourbaix $393,000
D.M. Wishart $154,000
Accrued Pension Obligations
As at December 31, 2006, TCPL's accrued obligation for the Supplemental Pension
Plan was approximately $197.9 million. The 2006 current service costs and
interest costs of the Supplemental Pension Plan were approximately $5.1 and $8.9
million, respectively, for a total of $14.0 million. The accrued pension
obligation is calculated following the method prescribed by the Canadian
Institute of Chartered Accountants and is based on management's best estimate of
future events that affect the cost of pensions, including assumptions about
future salary adjustments and bonuses. More information on the accrued
obligations and the assumptions utilized may be found in Note 19
TRANSCANADA PIPELINES LIMITED 51
(Employee Future Benefits) of the Notes to TCPL's 2006 Consolidated Financial
Statements which are available on the Company's website at www.transcanada.com
and filed on SEDAR at www.sedar.com.
The accrued pension obligations for the Named Executive Officers under both the
Registered Pension Plan and the Supplemental Pension Plan are outlined in the
following table. Changes include the fiscal 2006 expense attributed to service
and compensation, as well as the normal increases to pension obligations arising
from the annual valuation of the Company's pension plans. The normal increases
include interest on the beginning of year obligations and changes in interest
rate assumptions as a result of changes in long-term bond yields.
Name Accrued obligation Change in accrued Accrued obligation
at December 31, 2005 obligation for 2006(1) at December 31, 2006
(1) (2) (1)
(A) (B) (C) = (A) + (B)
H.N. Kvisle $6,129,000 $1,408,000 $7,537,000
G.A. Lohnes $845,000 $795,000 $1,640,000
R.K. Girling $1,111,000 $640,000 $1,751,000
A.J. Pourbaix $1,039,000 $640,000 $1,679,000
D.M. Wishart $1,167,000 $320,000 $1,487,000
(1)
The calculation of reported amounts use actuarial assumptions and methods
that are consistent with those used for calculating pension obligations and
annual expense as disclosed in the Company's 2005 and 2006 consolidated
financial statements. As the assumptions reflect the Company's best estimate
of future events, the values shown in the above table may not be directly
comparable to similar estimates of pension obligations that may be disclosed
by other corporations.
(2)
Excluded from the change in accrued obligation for 2006 is the impact of
investment returns on the Company's pension plan assets.
Executive Separation Agreements
Executive separation agreements with the Executives (including each of the Named
Executive Officers) outline the terms and conditions applicable in the event of
the Executive's separation from TCPL due to retirement, termination (with or
without cause), resignation (with or without good reason), disability or death.
Good reason is an event which constitutes a constructive dismissal of the
Executive. A change of control by itself without an event that constitutes
constructive dismissal would not be good reason.
52 TRANSCANADA PIPELINES LIMITED
The following table summarizes the material terms and provisions that apply in
the event of termination without cause or resignation with good reason.
Severance Payment Annualized salary rate as of the termination date, plus the average of the previous
three years' annual short-term compensation plan payments (the "Annual Compensation"),
multiplied by a notice period(1).
Benefits Continuation of benefits during the notice period or a cash payment in lieu of
continued benefits.
Perquisites A cash payment for perquisites the Executive would have received during the notice
period.
Pension Continued accrual of pensionable service until the earlier of retirement, death and
expiry of the notice period(2). However, if the termination date is within two years
of a change of control, then the Executive would immediately receive the credit of
pensionable service as though the full notice period has occurred and any vesting
requirements under the pension plans would be deemed to have been met upon a change of
control.
Short-term Compensation A cash amount equal to the average amount of the annual bonus paid to the Executive in
respect of the three years prior to the year in which the termination occurs, pro
rated based on the number of days of service in the year in which the termination
occurs up to the termination date.
Mid-term Compensation If the termination date is within two years of a change of control, all unvested
grants under the ESU Plan shall be deemed vested and shall be paid out in cash to the
Executive. Otherwise, the Executive is provided with a prorated payment. This payment
is based on the granted dollar value and the number of months the Executive
participated in the grant term prior to termination (as per other plan participants).
Long-term Compensation The participant may exercise outstanding vested and exercisable stock options no later
than the later of the last day of the notice period and six months after the last day
of active employment, after which date all outstanding stock options are forfeited. No
options vest during the notice period.
(1)
In the case of Mr. Kvisle, the notice period is three years. In the case of
the other Executives, the notice period is two years.
(2)
For Mr. Kvisle, Mr. Girling and Mr. Pourbaix, their respective notice
periods would also be considered in the calculation of additional credited
pensionable service as agreed to in their specific arrangements as described
below.
A change of control includes (but is not limited to) another entity becoming
the beneficial owner of more than 20% of the voting shares of TransCanada or
more than 50% of the voting shares of TCPL (not including the voting shares of
TCPL held by TransCanada). A change of control in itself does not trigger any
cash payments under the agreements. However, in the month following the one year
anniversary after a change of control, Mr. Kvisle may provide notice of his
intention to leave TCPL and receive all of the entitlements of a resignation for
good reason.
TRANSCANADA PIPELINES LIMITED 53
The following table summarizes the material terms and provisions provided for
all executives in the executive separation agreements in the event of a change
of control.
Mid-term Compensation If the Executive's termination date is within two years of a change of control, all
unvested grants under the ESU Plan shall be deemed vested and shall be paid out in
cash to the Executive.
Long-term Compensation Following a change of control, there is an acceleration of stock option vesting under
the Stock Option Plan. If for any reason the Company is unable to affect the
acceleration of such vesting, the Company will pay the Executive a cash payment. This
payment would be equal to the net amount of compensation the Executive would have
received if the Executive had, on the date of a change of control, exercised all
vested options and unvested options for which vesting would have been accelerated.
During 2007, TCPL intends to implement a "double trigger" in the Executive Separation
Agreements where the acceleration of stock options vesting is contingent on both a
change of control and the termination of the executive's employment.
The agreements provide that TCPL may elect to take advantage of a
non-competition provision effective for a period of 12 months from the date of
termination upon payment to the Executive of an amount valued at one additional
year of Annual Compensation.
Supplemental Disclosure - Total Compensation Awards
Annually, the Committee approves compensation awards that deliver market
competitive and performance-relevant TDC, which is a combination of base salary
and variable incentives, to the Executives. Although not awarded annually, TCPL
also considers the annual value of the Base and Supplemental Pension Plans to be
an integral part of the Company's Executive Compensation Program. For the
purposes of this supplemental disclosure, Total Compensation is defined as TDC
plus the pension expense related to service and compensation for the fiscal year
noted.
For all tables in this section, the following definitions are applicable for
the noted compensation elements:
Annual Base Salary: Unless otherwise noted, the annual base salary rate as at April 1st of the noted financial
year.
Cash Bonus: The total lump-sum cash award under the IC Program for performance attributable to the
noted financial year, and paid in the first quarter following the completion of that
financial year.
ESUs: The value granted under the ESU Plan on the date of grant. The number of units granted for
each financial year is based on this grant value and is reported in the various ESU Plan
Grant tables in the section "Long-Term Incentive Tables".
The number of units that vest from these grants is subject to specified performance
conditions over a three-year period. Payments received from vested units are variable
based on the valuation price as of the date of vesting.
Stock Options: The stock option values are based on the number of stock options granted for each
financial year as reported in the Summary Compensation Table multiplied by an economic
value per stock option as calculated by an external consulting firm. This valuation
methodology considers, among other things, the exercise price on the date of grant and the
seven year term of the options. This method may not be identical to the methods or
assumptions used by other companies, and as such, may not be directly comparable to other
companies.
Annual Pension Expense: Pension expense related to the year of service under both the Registered Pension Plan and
the Supplemental Pension Plan. The amount includes the impact of differences between
actual compensation paid in the financial year and the actuarial assumptions used for that
year. The value noted is rounded to the nearest one thousand dollars.
54 TRANSCANADA PIPELINES LIMITED
The following tables outline the value of Total Compensation awarded to the
Named Executive Officers as determined by the Committee for the last three
financial years.
H.N. Kvisle 2006 2005 2004
($) ($) ($)
FIXED
Annual Base Salary 1,100,000 1,100,000 900,000
VARIABLE
Cash Bonus 1,500,000 1,300,000 1,100,000
ESUs 1,917,500 1,940,004 1,206,089
Stock Options 782,500 360,000 361,350
Total Direct Compensation 5,300,000 4,700,004 3,567,439
Annual Pension Expense 713,000 1,604,000 894,000
G.A. Lohnes 2006(1) 2005(2) 2004(2)
($) ($) ($)
FIXED
Annual Base Salary 340,000 272,664 281,702
VARIABLE
Cash Bonus 320,000 208,240 161,173
ESUs 124,477 131,898 139,586
Stock Options 186,320 45,000 26,280
Total Direct Compensation 970,797 657,802 608,740
Annual Pension Expense 626,000 71,583 53,257
(1)
The value noted for Annual Base Salary reflects Mr. Lohnes' rate of pay as
of June 1, 2006 following his appointment to the position of Executive
Vice-President and Chief Financial Officer for TCPL. The value noted for
Stock Options reflects the total from two grants, namely $43,820 from the
annual grant in February and $142,500 from a special one-time grant in June.
(2)
These values reflect the compensation Mr. Lohnes was awarded during his
tenure as President and Chief Executive Officer of Great Lakes. Mr. Lohnes
became President and CEO in August 2000 and during his term, Great Lakes was
a pipeline joint venture owned 50/50 by TCPL and El Paso Corporation. The
values denoted were provided to Mr. Lohnes in U.S. dollars (or equivalent
value) but are expressed here in Canadian dollars based on the Bank of
Canada's average annual exchange rate for the financial year noted, namely
1.2116 for 2006, 1.3015 for 2005, and 1.4015 for 2004.
R.K. Girling 2006(1) 2005 2004
($) ($) ($)
FIXED
Annual Base Salary 520,000 460,000 460,000
VARIABLE
Cash Bonus 700,000 500,000 460,000
ESUs 618,300 544,965 482,452
Stock Options 566,700 135,000 131,400
Total Direct Compensation 2,405,000 1,639,965 1,533,852
Annual Pension Expense 384,000 158,000 86,000
(1)
The value noted for Annual Base Salary reflects Mr. Girling's rate of pay as
of June 1, 2006 following his appointment to the position of President,
Pipelines. The value noted for Stock Options reflects the total from two
grants, namely $281,700 from the annual grant in February and $285,000 from
a special one-time grant in June.
TRANSCANADA PIPELINES LIMITED 55
A.J. Pourbaix 2006(1) 2005 2004
($) ($) ($)
FIXED
Annual Base Salary 520,000 450,000 410,000
VARIABLE
Cash Bonus 700,000 500,000 450,000
ESUs 618,300 465,013 430,787
Stock Options 566,700 135,000 131,400
Total Direct Compensation 2,405,000 1,550,013 1,422,187
Annual Pension Expense 393,000 218,000 70,000
(1)
The value noted for Annual Base Salary reflects Mr. Pourbaix's rate of pay
as of June 1, 2006 following his appointment to the position of President,
Energy. The value noted for Stock Options reflects the total from two
grants, namely $281,700 from the annual grant in February and $285,000 from
a special one-time grant in June.
D.M. Wishart 2006 2005 2004
($) ($) ($)
FIXED
Annual Base Salary 400,000 380,000 350,000
VARIABLE
Cash Bonus 500,000 400,000 330,000
ESUs 327,850 370,003 354,979
Stock Options 172,150 90,000 87,600
Total Direct Compensation 1,400,000 1,240,003 1,122,579
Annual Pension Expense 154,000 155,000 190,000
ADDITIONAL INFORMATION
1.
Additional information in relation to TCPL may be found under TCPL's profile
on SEDAR at www.sedar.com.
2.
Additional information including directors' and officers' remuneration and
indebtedness, principal holders of TransCanada's securities and securities
authorized for issuance under equity compensation plans (all where
applicable), is contained in TransCanada's Proxy Circular for its most
recent annual meeting of shareholders that involved the election of
directors and can be obtained upon request from the Corporate Secretary of
TCPL.
3.
Additional financial information is provided in TCPL's audited consolidated
financial statements and MD&A for its most recently completed financial
year.
56 TRANSCANADA PIPELINES LIMITED
GLOSSARY
ACES Accelerated Clean Energy Supply
AIF Annual Information Form of TransCanada PipeLines Limited dated February 22, 2007
Alberta System A natural gas transmission system throughout the province of Alberta
Annual Report TCPL's Annual Report to Shareholders for the year ended, December 31, 2006
ANR American Natural Resources Company and ANR Storage Company
ANR Purchase An agreement between TransCanada and El Paso Corporation, dated December 22, 2006,
and Sale whereby TransCanada agreed to acquire ANR from El Paso Corporation.
Agreement
ANR System A natural gas transmission system which extends approximately 17,000 km from
producing fields in Louisiana, Oklahoma, Texas and the Gulf of Mexico to markets in
Wisconsin, Michigan, Illinois, Ohio and Indiana.
B.C. and A natural gas pipeline system in southeastern B.C., southern Alberta and
Foothills southwestern Saskatchewan
Systems
Bcf Billion cubic feet
Becancour A power plant near Trois-Rivieres, Quebec
Plant
Board TransCanada's Board of Directors
Bruce A Bruce Power A L.P.
Bruce B Bruce Power L.P.
Cacouna Energy The Cacouna Energy LNG facility in Cacouna, Quebec
Project
Canadian A natural gas pipeline system running from the Alberta border east to delivery
Mainline points in eastern Canada and along the U.S. border
Cartier Wind Six wind energy projects by Hydro-Quebec Distribution representing a total of 740
Energy Project MW in the Gaspe region of Quebec
CSA Canadian Securities Administrators
EUB Alberta Energy and Utilities Board
External KPMG LLP
Auditor
FERC Federal Energy Regulatory Commission (USA)
Gas A natural gas transmission system running from northwestern Idaho, through
Transmission Washington and Oregon to the California border
Northwest
System
Grandview A power plant in Saint John, New Brunswick
Plant
Great Lakes Great Lakes Gas Transmission Limited Partnership
Great Lakes A natural gas pipeline system in the north central U.S., roughly parallel to the
System Canada-U.S. Border
GUA Gas Utilities Act
HS&E Health, Safety and Environment
Iroquois A natural gas pipeline system in New York and Connecticut
System
LNG Liquefied Natural Gas
MD&A TCPL's Management's Discussion and Analysis dated February 22, 2007
MW Megawatts
NBPL Northern Border Pipeline
NBPL System A natural gas transmission system located in the upper midwestern portion of the
United States
NEB National Energy Board
North Baja A natural gas pipeline in southern California
System
Northern Northern Border Pipeline Company
Border
Pipeline
NOVA NOVA Corporation
NYSE New York Stock Exchange
PEC Portlands Energy Centre
Portland A natural gas pipeline that runs through Maine and New Hampshire into Massachusetts
System
Power LP TransCanada Power, L.P.
PPA Power Purchase Agreement
Proxy Circular TransCanada Corporation's Management Proxy Circular dated February 22, 2007
SEC U.S. Securities and Exchange Commission
Shell Shell US Gas & Power LLC
SOX U.S. Sarbanes-Oxley Act of 2002
TCC TransCanada Corporation
Tcf Trillion cubic feet
TCPL TransCanada PipeLines Limited
TQM Trans Quebec & Maritimes Pipeline Inc.
TQM System A natural gas pipeline system in southeastern Quebec
TransCanada TransCanada Corporation
TSX Toronto Stock Exchange
Tuscarora Tuscarora Gas Transmission Company
Tuscarora A natural gas pipeline that runs from Oregon through northeast California to Reno,
System Nevada
Year End December 31, 2006
TRANSCANADA PIPELINES LIMITED 57
SCHEDULE "A"
METRIC CONVERSION TABLE
The conversion factors set out below are approximate factors. To convert from
Metric to Imperial multiply by the factor indicated. To convert from Imperial to
Metric divide by the factor indicated.
Metric Imperial Factor
Kilometres Miles 0.62
Millimetres Inches 0.04
Gigajoules Million British thermal units 0.95
Cubic metres* Cubic feet 35.3
Kilopascals Pounds per square inch 0.15
Degrees Celsius Degrees Fahrenheit to convert to Fahrenheit multiply by 1.8,
then add 32 degrees; to convert to Celsius
subtract 32 degrees, then divide by 1.8
*
The conversion is based on natural gas at a base pressure of 101.325
kilopascals and at a base temperature of 15 degrees Celsius.
TRANSCANADA PIPELINES LIMITED A-1
SCHEDULE "B"
DISCLOSURE OF CORPORATE GOVERNANCE PRACTICES
The Board and the members of TCPL's management are committed to the highest
standards of corporate governance. TCPL's corporate governance practices comply
with the governance rules of the Canadian Securities Administrators ("CSA"),
those of the New York Stock Exchange ("NYSE") applicable to foreign issuers and
of the U.S. Securities and Exchange Commission ("SEC"), and those mandated by
the United States Sarbanes-Oxley Act of 2002 ("SOX"). As a non-U.S. company,
TCPL is not required to comply with most of the NYSE corporate governance
listing standards; however, except as summarized on its website at
www.transcanada.com, the governance practices followed are in compliance with
the NYSE standards for U.S. companies in all significant respects. TCPL is in
compliance with the CSA's Multilateral Instrument 52-110 pertaining to audit
committees ("Canadian Audit Committee Rules"); National Policy 58-201, Corporate
Governance Guidelines; and National Instrument 58-101, Disclosure of Corporate
Governance Practices (collectively, the "Canadian Governance Guidelines").
TCPL's principal objective in directing and managing its business and affairs is
to enhance shareholder value. TCPL believes that effective corporate governance
improves corporate performance and benefits all shareholders. TCPL also believes
that director, management and employee honesty and integrity are vital factors
in ensuring good corporate governance. The discussion that follows relates
primarily to the Canadian Governance Guidelines and highlights various elements
of the Company's corporate governance program. It has been approved by the
Governance Committee and by the Board.
Board of Directors
The Board believes that, as a matter of policy, there should be a majority of
independent directors on TCPL's Board. The Board is charged with making this
determination. The Board is currently comprised of 13 directors, of whom 11
(85%) were determined by the Board in 2006 to be independent directors. Thirteen
nominees are being put forward for election at the Meeting, 11 (85%) of whom
have been determined by the Board to be independent. The Board annually
determines the independent status of each of its members and each nominee for
election, based on a written set of criteria developed in accordance with the
definition of "independent" in the Canadian Audit Committee Rules and the
Canadian Governance Guidelines. The independence criteria also conform with the
applicable rules of the SEC, the NYSE and those set out under SOX. The Board has
determined that none of the nominees for director, with the exception of Mr.
Kvisle and Mr. Stewart, have a direct or indirect material relationship with
TCPL that could interfere with their ability to act in the best interests of
TCPL.
Mr. Kvisle, as the CEO of TCPL, is not independent. Mr. Stewart is not
independent as he provided consulting services to TCPL and received more than
$75,000 in compensation during the 2005 financial year. Mr. Stewart's consulting
contract terminated on December 31, 2005 and, assuming no other factors affect
his status as an independent director, he will be considered independent on
November 1, 2008.
The Governance Committee reviews, at least annually, the existence of any
relationship between each director and TCPL to ensure that the majority of
directors are independent of TCPL.
Further, the Board considered whether directors serving on boards of non-profit
organizations which receive donations from TCPL pose any potential conflict. The
Board determined that such relationships, where they exist, do not interfere
with any such director's ability to act in the best interests of TCPL, as all
decisions on making donations to non-profit organizations are made by a
management committee on which no directors serve. The Board also considered
family relationships and possible associations with companies which have
relationships with TCPL, in its determination of independence.
Although some of the proposed nominees sit on boards or may be otherwise
associated with companies that ship natural gas on TCPL's pipeline systems, TCPL
as a common carrier in Canada cannot, under its tariff, deny transportation
service to a credit-worthy shipper. Further, due to the specialized nature of
the industry, TCPL believes that it is important for its Board to be composed of
qualified and knowledgeable directors, so some of them must come from oil and
gas producers and shippers; the Governance Committee closely monitors
relationships among
TRANSCANADA PIPELINES LIMITED B-1
directors to ensure that business associations do not affect the Board's
performance. In a circumstance where a director declares an interest in any
material contract or material transaction being considered at a meeting, the
director generally absents himself or herself from the meeting during the
consideration of the matter, and does not vote on the matter.
All reporting issuers of which the nominees are presently directors of are set
out in the table in TransCanada's Management Proxy Circular under the heading
"Business to be Transacted at the Meeting - Election of Directors".
In 2006, independent directors of the Board met separately after every
regularly scheduled meeting. There were seven such meetings during 2006.
Mr. Jackson has served as the Chair of TCPL since April 30, 2005. He has also
acted as chair-person for Deer Creek Energy Limited (from 2001 to 2005) and
Resolute Energy Inc. (from 2002 to 2005).
The attendance record of each director for all Board and committee meetings
held for the 12-month period ending December 31, 2006 is set out with each
director's biography in TransCanada's Management Proxy Circular under the
heading "Business to be Transacted at the Meeting - Election of Directors ".
Board Mandate
The Board discharges its responsibilities directly and through committees. At
regularly scheduled meetings, members of the Board and management discuss a
broad range of issues relevant to TCPL's strategy and business interests and the
Board is responsible for the approval of TCPL's strategic plan. In addition, the
Board receives reports from management on TCPL's operational and financial
performance. The Board had seven scheduled meetings in 2006. Unscheduled
meetings are held from time to time as required; there were four unscheduled
meetings of the Board in 2006. There were also three strategic issue sessions
and one full-day strategic planning session of the Board held in 2006.
The Board operates under a written charter while retaining plenary power. Any
responsibility not delegated to management or a committee of the Board remains
with the Board. The Charter of the Board of Directors addresses Board
composition and organization, and the Board's duties and responsibilities for
managing the affairs of TCPL and its oversight responsibilities with respect to:
management and human resources; strategy and planning; financial and corporate
issues; business and risk management; policies and procedures; compliance
reporting and corporate communications; and general legal obligations of TCPL.
The charter is available on TransCanada's website at www.transcanada.com and is
attached to TCPL's AIF as Schedule "C".
The Board also closely oversees any potential conflicts of interest between the
Company and its affiliates including TC PipeLines, LP, a public limited
partnership.
Charters have been adopted for each of the committees outlining their principal
responsibilities. The Board and each committee reviews its charter annually to
ensure it is in line with the current developments in corporate governance. The
Board and each committee is responsible to update its respective charter. All
charters are available on TransCanada's website at www.transcanada.com.
Position Descriptions
The Board has developed written position descriptions for its chair, the chair
of each of the Board committees and for the CEO. The responsibilities of each
committee chair are set out in each respective committee's Charter. The written
position descriptions and the committee charters are available on TransCanada's
website at www.transcanada.com.
The Human Resources Committee and the Board annually review and approve the
CEO's personal performance objectives and review with him or her their
performance against the previous year's objectives. The Human Resources
Committee's report on executive compensation can be found in TCPL's AIF under
the heading "Executive Compensation and Other Information - Report on Executive
Compensation".
Orientation and Continuing Education
New directors are provided with an orientation and education program that
includes a directors' manual containing information about the duties and
obligations of directors, the business and operations of TCPL, copies of
governance
B-2 TRANSCANADA PIPELINES LIMITED
charters, copies of past public filings and documents from recent Board
meetings. New directors are given additional historical and financial
information, a session on corporate strategy, are provided opportunities to
visit TCPL's facilities and project sites, and are provided with opportunities
for meetings and discussions with the executive leadership team and other
directors. Briefing sessions are also held for new committee members, as
appropriate. The directors' manual and the director induction and continuing
education process are reviewed annually by the Governance Committee. The details
of the orientation of each new director are tailored to each director's
individual needs and expressed areas of interest.
Senior management as well as external experts make presentations to the Board
and to its committees periodically on various business-related topics and on
changes in legal, regulatory and industry requirements. Directors tour certain
TCPL operating facilities and project sites on an annual basis. TCPL encourages
continuing education for its directors, periodically suggests programs which may
be relevant to the directors and provides funding for director education. All
directors are members of the Canadian Institute of Corporate Directors which
provides another source of director education.
Ethical Business Conduct
The Board has formally adopted and published a set of Corporate Governance
Guidelines, which affirms TCPL's commitment to maintaining a high standard of
corporate governance. The guidelines address the structure and composition of
the Board and its committees and also provide guidance to both the Board and
management in clarifying their respective responsibilities. The Board's
strengths include: an independent, non-executive Chair; well informed and
experienced directors who ensure that standards exist to promote ethical
behaviour throughout TCPL; an effective board size; alignment with shareholders
through director share ownership requirements; and annual assessments of Board,
committee and individual director effectiveness. TCPL's Corporate Governance
Guidelines are available on TransCanada's website at www.transcanada.com.
The Board has also adopted a code of business ethics for directors which
incorporates as its basis, principles of good conduct and highly ethical
behaviour. TCPL has adopted codes of business ethics for its employees and one
applicable to its CEO, Chief Financial Officer and Controller, all of which must
be certified on an annual basis. Compliance with the Company's various codes is
monitored by the Audit Committee and reported to the Board. There have been no
departures from these codes in 2006. TCPL's codes of business ethics may be
viewed on TransCanada's website at www.transcanada.com.
In a circumstance where a director declares an interest in any material
contract or material transaction being considered at a meeting, the director
generally absents himself or herself from the meeting during the consideration
of the matter, and does not vote on the matter.
Nomination of Directors
The Governance Committee, which is composed entirely of independent directors,
is responsible for proposing new nominees to the Board, which in turn is
responsible for identifying suitable candidates for election by the
shareholders. The Governance Committee annually reviews the qualifications of
persons proposed for election to the Board and submits its recommendations to
the Board for consideration. The objective of this review is to maintain the
composition of the Board in a way that provides the best mix of skills and
experience to guide the long-term strategy and ongoing business operations of
TransCanada. New nominees must have experience in the industries in which TCPL
participates or experience in general business management of corporations that
are a similar size and scope to TransCanada, the ability to devote the time
required, and a willingness to serve. The Governance Committee also advises the
Board on the criteria for, and determination of, the independence of each
director.
The Governance Committee maintains a matrix of skills and requirements and
periodically assesses the skill set of the current Board members to identify
necessary skills and backgrounds for Board candidates. The Governance Committee
also maintains an "evergreen" list of potential candidates for its future
consideration and periodically retains independent search firms to identify new
candidates for election to the Board.
TRANSCANADA PIPELINES LIMITED B-3
The Board has determined that no person shall stand for election or re-election
to the Board if he or she attains the age of 70 years on or before the date of
the annual meeting held in relation to the election of directors; provided
however, that if a director attains the age of 70 before serving a full seven
consecutive years on the Board, that director may stand for re-election, upon
the recommendation of the Board each year until that director has served a full
seven years on the Board.
Further information relating to the Governance Committee can be found in TCPL's
AIF under Schedule "D", "Description of Board Committees and Their Charters -
Governance Committee".
Compensation
The Governance Committee reviews the compensation of the directors on an annual
basis, taking into account such matters as time commitment, responsibility, and
compensation provided by comparable companies, and makes an annual
recommendation to the Board for consideration. Towers Perrin provides an annual
report on directors' compensation paid by comparable companies to facilitate the
Governance Committee's review of director compensation. Directors may receive
their compensation in the form of cash and deferred share units. With the
exception of Mr. Kvisle, who follows the Share Ownership Guidelines for
executives, Directors must hold a minimum of five times their annual cash
retainer fee in common shares or related deferred share units of TransCanada.
Directors have a maximum of five years to reach this level of share ownership.
The Human Resources Committee, which is composed entirely of independent
directors, conducts an annual review of the performance of TCPL and the CEO as
measured against objectives established in the prior year by the Board, the
Human Resources Committee and the CEO. The results of this annual review are
reported to the Board, which then makes an evaluation of the overall performance
of TCPL and the CEO. The chair of the Board and the chair of the Human Resources
Committee communicate this performance evaluation to the CEO. The evaluation is
used by the Human Resources Committee in its deliberations concerning the CEO's
annual compensation. The evaluation of TCPL's performance against corporate
objectives also forms part of the determination of the compensation of all
employees. The Human Resources Committee's report on executive compensation can
be found in TCPL's AIF under the heading "Executive Compensation and Other
Information - Report on Executive Compensation".
Further information relating to the Human Resources Committee can be found in
TCPL's AIF under Schedule "D", "Description of Board Committees and Their
Charters - Human Resources Committee".
Information relating to compensation consulting services provided by Towers
Perrin during the 2006 financial year can be found in TCPL's AIF under the
heading "Executive Compensation and Other Information - Report on Executive
Compensation - Executive Compensation Advisory Services".
Other Board Committees
The Board has the following Committees: Audit; Health, Safety and Environment;
Governance; and Human Resources. Details relating to these committees can be
found in TCPL's AIF under Schedule "D", "Description of Board Committees and
Their Charters".
Assessments
The Governance Committee is responsible for making an annual assessment of the
overall performance of the Board, its committees and its individual members, and
reporting its findings to the Board. An annual questionnaire is utilized as part
of this process. This questionnaire is circulated to each of the directors and
is administered by the Corporate Secretary.
The questionnaire examines the effectiveness of the Board as a whole, and of
each committee, and specifically reviews areas that the Board and/or management
believe could be improved or enhanced to ensure the continued effectiveness of
the Board and its committees in the execution of their responsibilities. Each
committee also conducts an annual self-assessment, based on specific questions
in the annual questionnaire. Responses are provided to the Chair and collated
results are distributed to directors and discussed at the Board.
B-4 TRANSCANADA PIPELINES LIMITED
The annual questionnaire and the individual director's terms of reference are
then used in the evaluation of the contribution of individual directors. Formal
interviews with each director and each member of TCPL's executive leadership
team are carried out annually by the Chair with respect to this matter. The
Chair of the Governance Committee also interviews each director annually on his
or her assessment of the Chair's performance. All of these assessments are
reported annually to the full Board.
TCPL believes that due to the specialized nature of the industry, it is
important for its Board to be composed of qualified and knowledgeable directors.
During the last year, all directors demonstrated a strong commitment to their
roles and responsibilities through an average 94% overall attendance rate at
Board meetings and an average 95% attendance rate at committee meetings. In
addition, all of the directors are available to meet with management as
required.
Financial Literacy of Directors
The Board has determined that all of the members of its Audit Committee are
financially literate. An individual is financially literate if he or she has the
ability to read and understand a set of financial statements that present a
breadth and level of complexity of accounting issues that are generally
comparable to the breadth and complexity of the issues that can reasonably be
expected to be raised by TCPL's financial statements.
Majority Voting for Directors
TCPL has adopted a policy whereby, at any meeting where the number of nominees
for election is the same as the number of director positions on the Board, if
proxy votes withheld for the election of any particular director are greater
than 5% of the votes cast by proxy, a ballot pertaining to the election of each
of the directors will be held at that meeting. A director is required to tender
his resignation if the director receives more votes "withheld" than "for" that
director's election when such ballot is held. In the absence of extenuating
circumstances, the Board is expected to accept that resignation within 90 days.
The Board may fill a vacancy in accordance with TCPL's by-laws and the Canada
Business Corporations Act. The policy does not apply in the event of a proxy
contest with respect to the election of directors. This policy is part of TCPL's
Corporate Governance Guidelines which are published on its website at
www.transcanada.com.
TRANSCANADA PIPELINES LIMITED B-5
SCHEDULE "C"
CHARTER OF THE BOARD OF DIRECTORS
I. INTRODUCTION
A.
The Board's primary responsibility is to foster the long-term success of
the Company consistent with the Board's fiduciary responsibility to the
shareholders to maximize shareholder value.
B.
The Board of Directors has plenary power. Any responsibility not
delegated to management or a committee of the Board remains with the
Board. This Charter is prepared to assist the Board and management in
clarifying responsibilities and ensuring effective communication between
the Board and management.
II. COMPOSITION AND BOARD ORGANIZATION
A.
Nominees for directors are initially considered and recommended by the
Governance Committee of the Board, approved by the entire Board and
elected annually by the shareholders of the Company.
B.
The Board must be comprised of a majority of members who have been
determined by the Board to be independent. A member is independent if
the member has no direct or indirect relationship which could, in the
view of the Board, reasonably interfere with the exercise of a member's
independent judgment.
C.
Directors who are not members of management will meet on a periodic
basis to discuss matters of interest independent of any influence from
management.
D.
Certain of the responsibilities of the Board referred to herein may be
delegated to committees of the Board. The responsibilities of those
committees will be as set forth in their Charter, as amended from time
to time.
III. DUTIES AND RESPONSIBILITIES
A.
Managing the Affairs of the Board
The Board operates by delegating certain of its authorities, including
spending authorizations, to management and by reserving certain powers
to itself. Certain of the legal obligations of the Board are described
in detail in Section IV. Subject to these legal obligations and to the
Articles and By-laws of the Company, the Board retains the
responsibility for managing its own affairs, including:
i)
planning its composition and size;
ii)
selecting its Chair;
iii)
nominating candidates for election to the Board;
iv)
determining independence of Board members;
v)
approving committees of the Board and membership of directors
thereon;
vi)
determining director compensation; and
vii)
assessing the effectiveness of the Board, committees and directors
in fulfilling their responsibilities.
TRANSCANADA PIPELINES LIMITED C-1
B.
Management and Human Resources
The Board has the responsibility for:
i)
the appointment and succession of the Chief Executive Officer (CEO)
and monitoring CEO performance, approving CEO compensation and
providing advice and counsel to the CEO in the execution of the
CEO's duties;
ii)
approving a position description for the CEO;
iii)
reviewing CEO performance at least annually, against agreed-upon
written objectives;
iv)
approving decisions relating to senior management, including the:
a)
appointment and discharge of officers of the Company and members of
the senior leadership team;
b)
compensation and benefits for members of the senior leadership team;
c)
acceptance of outside directorships on public companies by executive
officers (other than not-for-profit organizations);
d)
annual corporate and business unit performance objectives utilized
in determining incentive compensation or other awards to officers;
and
e)
employment contracts, termination and other special arrangements
with executive officers, or other employee groups if such action is
likely to have a subsequent material(1) impact on the Company or its
basic human resource and compensation policies.
(1)
For purposes of this Charter, the term "material" includes a transaction or
a series of related transactions that would, using reasonable business
judgment and assumptions, have a meaningful impact on the Corporation. The
impact could be relative to the Corporation's financial performance and
liabilities as well as its reputation.
v)
taking all reasonable steps to ensure succession planning programs
are in place, including programs to train and develop management;
vi)
approving certain matters relating to all employees, including:
a)
the annual salary policy/program for employees;
b)
new benefit programs or changes to existing programs that would
create a change in cost to the Company in excess of $10,000,000
annually;
c)
pension fund investment guidelines and the appointment of pension
fund managers; and
d)
material benefits granted to retiring employees outside of benefits
received under approved pension and other benefit programs.
C.
Strategy and Plans
The Board has the responsibility to:
i)
participate in strategic planning sessions to ensure that management
develops, and ultimately approve, major corporate strategies and
objectives;
ii)
approve capital commitment and expenditure budgets and related
operating plans;
iii)
approve financial and operating objectives used in determining
compensation;
iv)
approve the entering into, or withdrawing from, lines of business
that are, or are likely to be, material to the Company;
v)
approve material divestitures and acquisitions; and
C-2 TRANSCANADA PIPELINES LIMITED
vi)
monitor management's achievements in implementing major corporate
strategies and objectives, in light of changing circumstances.
D.
Financial and Corporate Issues
The Board has the responsibility to:
i)
take reasonable steps to ensure the implementation and integrity of the
Company's internal control and management information systems;
ii)
monitor operational and financial results;
iii)
approve annual financial statements and related Management's Discussion
and Analysis, review quarterly financial results and approve the release
thereof by management;
iv)
approve the Management Proxy Circular, Annual Information Form and
documents incorporated by reference therein;
v)
declare dividends;
vi)
approve financings, changes in authorized capital, issue and repurchase
of shares, issue and redemption of debt securities, listing of shares
and other securities, issue of commercial paper, and related
prospectuses and trust indentures;
vii)
recommend appointment of external auditors and approve auditors' fees;
viii)
approve banking resolutions and significant changes in banking
relationships;
ix)
approve appointments, or material changes in relationships with
corporate trustees;
x)
approve contracts, leases and other arrangements or commitments that may
have a material impact on the Company;
xi)
approve spending authority guidelines; and
xii)
approve the commencement or settlement of litigation that may have a
material impact on the Company.
E.
Business and Risk Management
The Board has the responsibility to:
i)
take all reasonable steps to ensure that management has identified
the principal risks of the Company's business and implemented
appropriate strategies to manage these risks, understands the
principal risks and achieves a proper balance between risks and
benefits;
ii)
review reports on capital commitments and expenditures relative to
approved budgets;
iii)
review operating and financial performance relative to budgets or
objectives;
iv)
receive, on a regular basis, reports from management on matters
relating to, among others, ethical conduct, environmental
management, employee health and safety, human rights, and related
party transactions; and
v)
assess and monitor management control systems by evaluating and
assessing information provided by management and others (e.g.
internal and external auditors) about the effectiveness of
management control systems.
F.
Policies and Procedures
The Board has responsibility to:
i)
monitor compliance with all significant policies and procedures by
which the Company is operated;
TRANSCANADA PIPELINES LIMITED C-3
ii)
direct management to ensure the Company operates at all times within
applicable laws and regulations and to the highest ethical and moral
standards;
iii)
provide policy direction to management while respecting its
responsibility for day-to-day management of the Company's
businesses; and
iv)
review significant new corporate policies or material amendments to
existing policies (including, for example, policies regarding
business conduct, conflict of interest and the environment).
G.
Compliance Reporting and Corporate Communications
The Board has the responsibility to:
i)
take all reasonable steps to ensure the Company has in place effective
disclosure and communication processes with shareholders and other
stakeholders and financial, regulatory and other recipients;
ii)
approve interaction with shareholders on all items requiring shareholder
response or approval;
iii)
take all reasonable steps to ensure that the financial performance of
the Company is adequately reported to shareholders, other security
holders and regulators on a timely and regular basis;
iv)
take all reasonable steps to ensure that financial results are reported
fairly and in accordance with generally accepted accounting principles;
v)
take all reasonable steps to ensure the timely reporting of any other
developments that have significant and material impact on the Company;
and
vi)
report annually to shareholders on the Board's stewardship for the
preceding year (the Annual Report).
IV. GENERAL LEGAL OBLIGATIONS OF THE BOARD OF DIRECTORS
The
Board is responsible for:
i)
directing management to ensure legal requirements have been met and
documents and records have been properly prepared, approved and
maintained;
ii)
approving changes in the By-laws and Articles of Incorporation, matters
requiring shareholder approval, and agendas for shareholder meetings;
iii)
approving the Company's legal structure, name, logo, mission statement
and vision statement; and
iv)
performing such functions as it reserves to itself or which cannot, by
law, be delegated to Committees of the Board or to management.
C-4 TRANSCANADA PIPELINES LIMITED
SCHEDULE "D"
DESCRIPTION OF BOARD COMMITTEES AND THEIR CHARTERS
The Board has four standing committees: the Audit Committee; the Governance
Committee; the Health, Safety and Environment Committee; and the Human Resources
Committee. The Board does not have an Executive Committee. The Audit, Human
Resources and Governance committees are required to be composed entirely of
independent directors. The Health, Safety and Environment Committee is required
to have a majority of independent directors.
Each of the committees has the authority to retain advisors to assist it in the
discharge of their respective responsibilities. Each of the committees review
their respective charters at least annually and, as required, recommend changes
to the Governance Committee and to the Board. Each of the committees also review
their respective performance annually.
Each of the committees has a charter; the committee charters are published on
TransCanada's website at www.transcanada.com.
Audit Committee
Chair: H.G. Schaefer, F.C.A.
Members: D.H. Burney, K.E. Benson, P. Gauthier, P.L. Joskow, J.A. MacNaughton
This committee is comprised of six independent directors and is mandated to
assist the Board in monitoring, among other things, the integrity of the
financial statements of TCPL, the compliance by TCPL with legal and regulatory
requirements, and the independence and performance of TCPL's internal and
external auditors. The committee is also mandated to review and recommend to the
Board approval of TCPL's audited annual and unaudited interim consolidated
financial statements and related management discussion and analysis, and other
corporate disclosure documents including information circulars, the annual
information form, all prospectuses, other offering memoranda, and any financial
statements required by regulatory authorities, before they are released to the
public or filed with the appropriate regulatory authorities. In addition, the
committee reviews and recommends to the Board the appointment and compensation
of the external auditor, oversees the accounting, financial reporting, control
and audit functions, and recommends funding of TCPL's pension plans.
Audit Committee information as required under the Canadian Audit Committee
Rules is contained in TCPL's Annual Information Form for the year ending
December 31, 2006 in the section "Corporate Governance - Audit Committee". Audit
committee information includes the charter, committee composition, relevant
education and experience of each member, reliance on exemptions, financial
literacy of each member, committee oversight, pre-approval policies and
procedures, and external auditor service fees by category. The Annual
Information Form is available on SEDAR at www.sedar.com under TCPL's profile and
is published on TransCanada's website at www.transcanada.com.
The committee oversees the operation of an anonymous and confidential toll free
telephone number for employees, contractors and the public to call with respect
to perceived accounting irregularities and ethical violations, and has set up a
procedure for the receipt, retention, treatment and regular review of any such
reported activities. This telephone number is published on TransCanada's website
at www.transcanada.com, on its intranet for employees and in the Company's
Annual Report to shareholders.
The committee reviews the audit plans of the internal and external auditors and
meets with them at the time of each committee meeting, in each case both with
and without the presence of management. The committee annually receives and
reviews the external auditor's formal written statement of independence
delineating all relationships between itself and TCPL and its report on
recommendations to management regarding internal controls and procedures, and
ensures the rotation of the lead audit partner having primary responsibility for
the audit as required by law. The committee pre-approves all audit services and
all permitted non-audit services. In addition, the committee discusses with
TRANSCANADA PIPELINES LIMITED D-1
management TCPL's material financial risk exposures and the actions management
has taken to monitor and control such exposures, reviews the internal control
procedures to oversee their effectiveness, monitors compliance with TCPL's
policies and codes of business ethics, and reports on these matters to the
Board. The committee reviews and approves the investment objectives and choice
of investment managers for the Canadian pension plans and considers and approves
any significant changes to those plans relating to financial matters.
There were six meetings of the Audit Committee in 2006.
Governance Committee
Chair: W.K. Dobson
Members: D.H. Burney, P.L. Joskow, D.P. O'Brien, H.G. Schaefer
This committee is comprised of five independent directors and is mandated to
enhance TCPL's governance through a continuing assessment of TCPL's approach to
corporate governance. The committee is also mandated to identify qualified
individuals to become Board members, to recommend to the Board nominees for
election as directors at each annual meeting of shareholders and to annually
recommend to the Board placement of directors on committees. The committee
annually reviews the independence status of each director in accordance with
written criteria in order to provide the Board with guidance for its annual
determination of director independence and for the placement of members on
committees.
The committee reviews and reports to the Board on the performance of individual
directors, the Board as a whole and each of the committees, in conjunction with
the Chair of the Board. The committee also monitors the relationship between
management and the Board, and reviews TCPL's structures to ensure that the Board
is able to function independently of management. The committee chair annually
reviews the performance of the Chair of the Board. The committee is also
responsible for an annual review of director compensation and for the
administration of the Share Unit Plan for Non-Employee Directors (1998),
including the granting of units under the plan.
The committee monitors best governance practice and ensures any corporate
governance concerns are raised with management. The committee also ensures the
Company has a best practice orientation package and monitors continuing
education for all directors.
There were two meetings of the Governance Committee in 2006.
Human Resources Committee
Chair: K.L. Hawkins
Members: W.K. Dobson, E.L. Draper, D.P. O'Brien
This committee is comprised of four independent directors and is mandated to
review the Company's human resources policies and plans, monitor succession
planning and to assess the performance of the CEO and other senior officers of
TCPL against pre-established objectives. The committee approves the salary and
other remuneration to be awarded to senior executive officers of TCPL. A report
on senior management development and succession is prepared annually for
presentation to the Board. The committee reports to the Board with
recommendations on the remuneration package for the CEO. The committee approves
executive compensation plans, including actual compensation awards for the most
senior officers and approves any major changes to TCPL's compensation and
benefit plans. The committee considers and approves any changes to TCPL's
pension plans relating to benefits provided under these plans. The committee
approves grants under the Stock Option Plan and accruals pursuant to the
Performance Unit Plan and has oversight responsibilities for the Executive Share
Unit Plan, the Performance Share Unit Plan, the Stock Option Plan and the
Performance Unit Plan.
D-2 TRANSCANADA PIPELINES LIMITED
There were four meetings of the Human Resources Committee in 2006.
Health, Safety and Environment Committee
Chair: E.L. Draper
Members: P. Gauthier, K.L. Hawkins, J.A. MacNaughton, D.M.G. Stewart
This committee is comprised of five directors, four of whom are considered
independent (all members other than Mr. Stewart), and is mandated to monitor the
health, safety and environmental practices and procedures of TCPL and its
subsidiaries for compliance with applicable legislation, conformity with
industry standards and prevention or mitigation of losses. The committee also
considers whether the implementation of TCPL's policies related to health,
safety and environmental matters are effective. The committee reviews reports
and, when appropriate, makes recommendations to the Board on TCPL's policies and
procedures related to health, safety and the environment. This committee meets
separately with officers of TCPL and its business units who have responsibility
for these matters and reports to the Board on such meetings.
There were three meetings of the Health, Safety and Environment Committee in
2006.
Chair's Participation in Committees
Mr. S.B. Jackson, the Chair of the Board, is an independent director. The Chair
is appointed by the Board and serves in a non-executive capacity. The Chair is a
non-voting member of all committees of the Board.
TRANSCANADA PIPELINES LIMITED D-3
SCHEDULE "E"
CHARTER OF THE AUDIT COMMITTEE
1. Purpose
The Audit Committee shall assist the Board of Directors (the "Board") in
overseeing and monitoring, among other things, the:
*
Company's financial accounting and reporting process;
*
integrity of the financial statements;
*
Company's internal control over financial reporting;
*
external financial audit process;
*
compliance by the Company with legal and regulatory requirements; and
*
independence and performance of the Company's internal and external
auditors.
To fulfill its purpose, the Audit Committee has been delegated certain
authorities by the Board of Directors that it may exercise on behalf of the
Board.
2. Roles and Responsibilities
I.
Appointment of the Company's External Auditors
Subject to confirmation by the external auditors of their compliance
with Canadian and U.S. regulatory registration requirements, the Audit
Committee shall recommend to the Board the appointment of the external
auditors, such appointment to be confirmed by the Company's shareholders
at each annual meeting. The Audit Committee shall also recommend to the
Board the compensation to be paid to the external auditors for audit
services and shall pre-approve the retention of the external auditors
for any permitted non-audit service and the fees for such service. The
Audit Committee shall also be directly responsible for the oversight of
the work of the external auditor (including resolution of disagreements
between management and the external auditor regarding financial
reporting) for the purpose of preparing or issuing an audit report or
related work. The external auditor shall report directly to the Audit
Committee.
The Audit Committee shall also receive periodic reports from the
external auditors regarding the auditors' independence, discuss such
reports with the auditors, consider whether the provision of non-audit
services is compatible with maintaining the auditors' independence and
the Audit Committee shall take appropriate action to satisfy itself of
the independence of the external auditors.
II.
Oversight in Respect of Financial Disclosure
The Audit Committee, to the extent it deems it necessary or appropriate,
shall:
(a)
review, discuss with management and the external auditors and
recommend to the Board for approval, the Company's audited annual
financial statements, annual information form including management
discussion and analysis, all financial statements in prospectuses
and other offering memoranda, financial statements required by
regulatory authorities, all prospectuses and all documents which may
be incorporated by reference into a prospectus, including without
limitation, the annual proxy circular, but excluding any pricing
supplements issued under a medium term note prospectus supplement of
the Company;
TRANSCANADA PIPELINES LIMITED E-1
(b)
review, discuss with management and the external auditors and
recommend to the Board for approval the release to the public of the
Company's interim reports, including the financial statements,
management discussion and analysis and press releases on quarterly
financial results;
(c)
review and discuss with management and external auditors the use of
"pro forma" or "adjusted" non-GAAP information and the applicable
reconciliation;
(d)
review and discuss with management and external auditors financial
information and earnings guidance provided to analysts and rating
agencies; provided, however, that such discussion may be done
generally (consisting of discussing the types of information to be
disclosed and the types of presentations to be made). The Audit
Committee need not discuss in advance each instance in which the
Company may provide earnings guidance or presentations to rating
agencies;
(e)
review with management and the external auditors major issues
regarding accounting and auditing principles and practices,
including any significant changes in the Company's selection or
application of accounting principles, as well as major issues as to
the adequacy of the Company's internal controls and any special
audit steps adopted in light of material control deficiencies that
could significantly affect the Company's financial statements;
(f)
review and discuss quarterly reports from the external auditors on:
(i)
all critical accounting policies and practices to be used;
(ii)
all alternative treatments of financial information within generally
accepted accounting principles that have been discussed with
management, ramifications of the use of such alternative disclosures
and treatments, and the treatment preferred by the external auditor;
(iii)
other material written communications between the external auditor
and management, such as any management letter or schedule of
unadjusted differences;
(g)
review with management and the external auditors the effect of
regulatory and accounting initiatives as well as off-balance sheet
structures on the Company's financial statements;
(h)
review with management, the external auditors and, if necessary, legal
counsel, any litigation, claim or contingency, including tax
assessments, that could have a material effect upon the financial
position of the Company, and the manner in which these matters have been
disclosed in the financial statements;
(i)
review disclosures made to the Audit Committee by the Company's CEO and
CFO during their certification process for the periodic reports filed
with securities regulators about any significant deficiencies in the
design or operation of internal controls or material weaknesses therein
and any fraud involving management or other employees who have a
significant role in the Company's internal controls;
(j)
discuss with management the Company's material financial risk exposures
and the steps management has taken to monitor and control such
exposures, including the Company's risk assessment and risk management
policies;
III.
Oversight in Respect of Legal and Regulatory Matters
(a)
review with the Company's General Counsel legal matters that may have a
material impact on the financial statements, the Company's compliance
policies and any material reports or inquiries received from regulators or
governmental agencies.
IV.
Oversight in Respect of Internal Audit
(a)
review the audit plans of the internal auditors of the Company including the
degree of coordination between such plan and that of the external auditors
and the extent to which the planned audit scope can be relied upon to detect
weaknesses in internal control, fraud or other illegal acts;
E-2 TRANSCANADA PIPELINES LIMITED
(b)
review the significant findings prepared by the internal auditing
department and recommendations issued by the Company or by any
external party relating to internal audit issues, together with
management's response thereto;
(c)
review compliance with the Company's policies and avoidance of
conflicts of interest;
(d)
review the adequacy of the resources of the internal auditor to
ensure the objectivity and independence of the internal audit
function, including reports from the internal audit department on
its audit process with associates and affiliates;
(e)
ensure the internal auditor has access to the Chair of the Audit
Committee and of the Board and to the Chief Executive Officer and
meet separately with the internal auditor to review with him any
problems or difficulties he may have encountered and specifically:
(i)
any difficulties which were encountered in the course of the audit
work, including restrictions on the scope of activities or access to
required information, and any disagreements with management;
(ii)
any changes required in the planned scope of the internal audit; and
(iii)
the internal audit department responsibilities, budget and staffing;
and to report to the Board on such meetings;
(f)
bi-annually review officers' expenses and aircraft usage reports;
V.
Insight in Respect of the External Auditors
(a)
review the annual post-audit or management letter from the external auditors
and management's response and follow-up in respect of any identified
weakness, inquire regularly of management and the external auditors of any
significant issues between them and how they have been resolved, and
intervene in the resolution if required;
(b)
review the quarterly unaudited financial statements with the external
auditors and receive and review the review engagement reports of external
auditors on unaudited financial statements of the Company;
(c)
receive and review annually the external auditors' formal written statement
of independence delineating all relationships between itself and the
Company;
(d)
meet separately with the external auditors to review with them any problems
or difficulties the external auditors may have encountered and specifically:
(i)
any difficulties which were encountered in the course of the audit work,
including any restrictions on the scope of activities or access to required
information, and any disagreements with management; and
(ii)
any changes required in the planned scope of the audit;
and to report to the Board on such meetings;
(e)
review with the external auditors the adequacy and appropriateness of
the accounting policies used in preparation of the financial statements;
(f)
meet with the external auditors prior to the audit to review the
planning and staffing of the audit;
(g)
receive and review annually the external auditors' written report on
their own internal quality control procedures; any material issues
raised by the most recent internal quality control review, or peer
review, of the external auditors, or by any inquiry or investigation by
governmental or professional authorities, within the preceding five
years, and any steps taken to deal with such issues;
(h)
review and evaluate the external auditors, including the lead partner of
the external auditor team;
TRANSCANADA PIPELINES LIMITED E-3
(i)
ensure the rotation of the lead (or coordinating) audit partner
having primary responsibility for the audit and the audit partner
responsible for reviewing the audit as required by law;
VI.
Oversight in Respect of Audit and Non-Audit Services
(a)
pre-approve all audit services (which may entail providing comfort letters
in connection with securities underwritings) and all permitted non-audit
services, other than non-audit services where:
(i)
the aggregate amount of all such non-audit services provided to the Company
constitutes not more than 5% of the total fees paid by the Company and its
subsidiaries to the external auditor during the fiscal year in which the
non-audit services are provided;
(ii)
such services were not recognized by the Company at the time of the
engagement to be non-audit services; and
(iii)
such services are promptly brought to the attention of the Audit Committee
and approved prior to the completion of the audit by the Audit Committee or
by one or more members of the Audit Committee to whom authority to grant
such approvals has been delegated by the Audit Committee;
(b)
approval by the Audit Committee of a non-audit service to be performed by
the external auditor shall be disclosed as required under securities laws
and regulations;
(c)
the Audit Committee may delegate to one or more designated members of the
Audit Committee the authority to grant pre-approvals required by this
subsection. The decisions of any member to whom authority is delegated to
pre-approve an activity shall be presented to the Audit Committee at its
first scheduled meeting following such pre-approval;
(d)
if the Audit Committee approves an audit service within the scope of the
engagement of the external auditor, such audit service shall be deemed to
have been pre-approved for purposes of this subsection;
VII.
Oversight in Respect of Certain Policies
(a)
review and recommend to the Board for approval policy changes and program
initiatives deemed advisable by management or the Audit Committee with
respect to the Company's codes of business conduct and ethics;
(b)
obtain reports from management, the Company's senior internal auditing
executive and the external auditors and report to the Board on the status
and adequacy of the Company's efforts to ensure its businesses are conducted
and its facilities are operated in an ethical, legally compliant and
socially responsible manner, in accordance with the Company's codes of
business conduct and ethics;
(c)
establish a non-traceable, confidential and anonymous system by which
callers may ask for advice or report any ethical or financial concern,
ensure that procedures for the receipt, retention and treatment of
complaints in respect of accounting, internal controls and auditing matters
are in place, and receive reports on such matters as necessary;
(d)
annually review and assess the adequacy of the Company's public disclosure
policy;
(e)
review and approve the Company's hiring policies for employees or former
employees of the external auditors (recognizing the Sarbanes-Oxley Act of
2002 does not permit the CEO, controller, CFO or chief accounting officer to
have participated in the Company's audit as an employee of the external
auditors' during the preceding one-year period) and monitor the Company's
adherence to the policy;
VIII.
Oversight in Respect of Financial Aspects of the Company's Pension Plans,
specifically:
(a)
provide advice to the Human Resources Committee on any proposed changes in
the Company's pension plans in respect of any significant effect such
changes may have on pension financial matters;
E-4 TRANSCANADA PIPELINES LIMITED
(b)
review and consider financial and investment reports and the funded
status relating to the Company's pension plans and recommend to the
Board on pension contributions;
(c)
receive, review and report to the Board on the actuarial valuation
and funding requirements for the Company's pension plans;
(d)
review and approve annually the Statement of Investment Policies and
Procedures ("SIP&P");
(e)
approve the appointment or termination of auditors and investment
managers;
IX.
Oversight in Respect of Internal Administration
(a)
review annually the reports of the Company's representatives on certain
audit committees of subsidiaries and affiliates of the Company and any
significant issues and auditor recommendations concerning such subsidiaries
and affiliates;
(b)
review the succession plans in respect of the Chief Financial Officer, the
Vice President, Risk Management and the Director, Internal Audit;
(c)
review and approve guidelines for the Company's hiring of employees or
former employees of the external auditors who were engaged on the Company's
account;
X.
Oversight Function
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements and
disclosures are complete and accurate or are in accordance with generally
accepted accounting principles and applicable rules and regulations. These
are the responsibilities of management and the external auditors. The Audit
Committee, its Chair and any of its members who have accounting or related
financial management experience or expertise, are members of the Board,
appointed to the Audit Committee to provide broad oversight of the financial
disclosure, financial risk and control related activities of the Company,
and are specifically not accountable nor responsible for the day to day
operation of such activities. Although designation of a member or members as
an "audit committee financial expert" is based on that individual's
education and experience, which that individual will bring to bear in
carrying out his or her duties on the Audit Committee, designation as an
"audit committee financial expert" does not impose on such person any
duties, obligations or liability that are greater than the duties,
obligations and liability imposed on such person as a member of the Audit
Committee and Board in the absence of such designation. Rather, the role of
any audit committee financial expert, like the role of all Audit Committee
members, is to oversee the process and not to certify or guarantee the
internal or external audit of the Company's financial information or public
disclosure.
3. Composition of Audit Committee
The Audit Committee shall consist of three or more Directors, a majority of whom
are resident Canadians (as defined in the Canada Business Corporations Act), and
all of whom are unrelated and/or independent for the purposes of applicable
Canadian and United States securities law and applicable rules of any stock
exchange on which the Company's shares are listed. Each member of the Audit
Committee shall be financially literate and at least one member shall have
accounting or related financial management expertise (as those terms are defined
from time to time under the requirements or guidelines for audit committee
service under securities laws and the applicable rules of any stock exchange on
which the Company's securities are listed for trading or, if it is not so
defined as that term is interpreted by the Board in its business judgment).
TRANSCANADA PIPELINES LIMITED E-5
4. Appointment of Audit Committee Members
The members of the Audit Committee shall be appointed by the Board from time
to time, on the recommendation of the Governance Committee and shall hold
office until the next annual meeting of shareholders or until their
successors are earlier appointed or until they cease to be Directors of the
Company.
5. Vacancies
Where a vacancy occurs at any time in the membership of the Audit Committee,
it may be filled by the Board on the recommendation of the Governance
Committee.
6. Audit Committee Chair
The Board shall appoint a Chair of the Audit Committee who shall:
(a)
review and approve the agenda for each meeting of the Audit Committee
and as appropriate, consult with members of management;
(b)
preside over meetings of the Audit Committee;
(c)
report to the Board on the activities of the Audit Committee relative to
its recommendations, resolutions, actions and concerns; and
(d)
meet as necessary with the internal and external auditors.
7. Absence of Audit Committee Chair
If the Chair of the Audit Committee is not present at any meeting of the
Audit Committee, one of the other members of the Audit Committee present at
the meeting shall be chosen by the Audit Committee to preside at the
meeting.
8. Secretary of Audit Committee
The Corporate Secretary shall act as Secretary to the Audit Committee.
9. Meetings
The Chair, or any two members of the Audit Committee, or the internal
auditor, or the external auditors, may call a meeting of the Audit
Committee. The Audit Committee shall meet at least quarterly. The Audit
Committee shall meet periodically with management, the internal auditors and
the external auditors in separate executive sessions.
10. Quorum
A majority of the members of the Audit Committee, present in person or by
telephone or other telecommunication device that permit all persons
participating in the meeting to speak to each other, shall constitute a
quorum.
E-6 TRANSCANADA PIPELINES LIMITED
11. Notice of Meetings
Notice of the time and place of every meeting shall be given in writing or
facsimile communication to each member of the Audit Committee at least 24
hours prior to the time fixed for such meeting; provided, however, that a
member may in any manner waive a notice of a meeting. Attendance of a member
at a meeting is a waiver of notice of the meeting, except where a member
attends a meeting for the express purpose of objecting to the transaction of
any business on the grounds that the meeting is not lawfully called.
12. Attendance of Company Officers and Employees at Meeting
At the invitation of the Chair of the Audit Committee, one or more officers
or employees of the Company may attend any meeting of the Audit Committee.
13. Procedure, Records and Reporting
The Audit Committee shall fix its own procedure at meetings, keep records of
its proceedings and report to the Board when the Audit Committee may deem
appropriate but not later than the next meeting of the Board.
14. Review of Charter and Evaluation of Audit Committee
The Audit Committee shall review its Charter annually or otherwise, as it
deems appropriate, and if necessary propose changes to the Governance
Committee and the Board. The Audit Committee shall annually review the Audit
Committee's own performance.
15. Outside Experts and Advisors
The Audit Committee is authorized, when deemed necessary or desirable, to
retain independent counsel, outside experts and other advisors, at the
Company's expense, to advise the Audit Committee or its members
independently on any matter.
16. Reliance
Absent actual knowledge to the contrary (which shall be promptly reported to
the Board), each member of the Audit Committee shall be entitled to rely on
(i) the integrity of those persons or organizations within and outside the
Company from which it receives information, (ii) the accuracy of the
financial and other information provided to the Audit Committee by such
persons or organizations and (iii) representations made by Management and
the external auditors, as to any information technology, internal audit and
other non-audit services provided by the external auditors to the Company
and its subsidiaries.
TRANSCANADA PIPELINES LIMITED E-7
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Financial Highlights
Year ended December 31 2006 2005 2004 2003 2002
(millions of dollars)
Income
Net income applicable to common
shares
Continuing operations 1,049 1,208 978 801 747
Discontinued operations 28 - 52 50 -
Net income applicable to common 1,077 1,208 1,030 851 747
shares
Cash Flow
Funds generated from operations 2,374 1,950 1,701 1,822 1,843
(Increase)/decrease in operating (300 ) (48 ) 28 93 92
working capital
Net cash provided by operations 2,074 1,902 1,729 1,915 1,935
Capital expenditures and 2,042 2,071 2,046 965 851
acquisitions
Balance Sheet
Total assets 25,908 24,113 22,421 20,884 20,555
Long-term debt 10,887 9,640 9,749 9,516 8,899
Common shareholders' equity 7,618 7,164 6,484 6,044 5,747
,G150531.JPG
This information is provided by RNS
The company news service from the London Stock Exchange
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