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Citi Fun 24 | LSE:BC93 | London | Medium Term Loan |
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RNS Number:0979S TransCanada Pipelines Ld 01 March 2007 PART 5 96 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Net Investment in Foreign Operations At December 31, 2006 and 2005, the Company had net investments in self-sustaining foreign operations with a U.S. dollar functional currency which created an exposure to changes in exchange rates. The Company uses U.S. dollar denominated debt and derivatives to hedge this exposure on an after-tax basis. The fair value for derivatives used to manage the exposure is shown in the table below. 2006 2005 Asset/(Liability) Accounting Fair Value Notional Fair Value Notional December 31 (millions of dollars) Treatment or or Principal Principal Amount Amount U.S. dollar cross-currency swaps Hedge 58 U.S. 400 119 U.S. 450 (maturing 2007 to 2013) U.S. dollar forward foreign exchange Hedge (7 ) U.S. 390 5 U.S. 525 contracts (maturing 2007) U.S. dollar options Hedge (6 ) U.S. 500 - U.S. 60 (maturing 2007) Reconciliation of Foreign Exchange Adjustment December 31 (millions of dollars) 2006 2005 Balance at January 1 (loss) (90 ) (71 ) Translation gains/(losses) on foreign currency denominated net 8 (21 ) assets(1) (Losses)/gains on derivatives (9 ) 23 Income taxes 1 (21 ) Balance at December 31 (loss) (90 ) (90 ) (1) The amount for 2006 includes gains of $6 million (2005 - $80 million) related to foreign currency denominated debt designated as a hedge. Foreign Exchange and Interest Rate Management Activity The Company manages the foreign exchange and interest rate risks related to its U.S. dollar denominated debt and transactions and interest rate exposures of the Canadian Mainline, the Alberta System and the BC System through the use of foreign currency and interest rate derivatives. Certain of the realized gains and losses on these derivatives are shared with shippers on predetermined terms. The details of the foreign exchange and interest rate derivatives are shown in the table below. 2006 2005 Asset/(Liability) Accounting Fair Notional Fair Notional December 31 (millions of dollars) Treatment Value or Value or Principal Principal Amount Amount Foreign Exchange Cross-currency and interest-rate Hedge (32 ) 136/U.S. 100 - - swaps (maturing 2013) (maturing 2010 to 2012) Non-hedge (52 ) 227/U.S. 157 (86 ) 363/U.S. 257 (84 ) (86 ) Interest Rate Interest rate swaps Canadian dollars (maturing 2007 to 2008) Hedge 2 100 4 100 (maturing 2007 to 2009) Non-hedge 5 300 7 374 7 11 U.S. dollars (maturing 2007 to 2009) Non-hedge 4 U.S. 100 5 U.S. 100 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 97 The Company manages the foreign exchange and interest rate exposures of its other businesses through the use of foreign currency and interest rate derivatives. The details of these foreign currency and interest rate derivatives are shown in the table below. 2006 2005 Asset/(Liability) Accounting Fair Notional Fair Notional December 31 (millions of dollars) Treatment Value or Value or Principal Principal Amount Amount Foreign Exchange Options (maturing 2007) Non-hedge - U.S. 95 1 U.S. 195 Forward foreign exchange contracts Hedge - - 2 U.S. 29 (maturing 2007) Non-hedge (3 ) U.S. 250 1 U.S. 208 (3 ) 4 Interest Rate Options (maturing 2007) Non-hedge - U.S. 50 - - Interest rate swaps Canadian dollar (maturing 2007 to 2011) Hedge - 150 1 100 (maturing 2009 to 2011) Non-hedge - 164 1 423 - 2 U.S. dollars (maturing 2011 to 2017) Hedge (2 ) U.S. 350 - U.S. 50 (maturing 2007 to 2016) Non-hedge 9 U.S. 450 18 U.S. 550 7 18 Foreign exchange gains included in Other Expenses/(Income) for the year ended December 31, 2006 are $4 million (2005 - $19 million; 2004 - $6 million). Certain of the Company's joint ventures use interest rate derivatives to manage interest rate exposures. The Company's proportionate share of the fair value of these outstanding derivatives at December 31, 2006 and 2005 was nil. Energy Price Risk Management The Company executes power, natural gas and heat rate derivatives for overall management of its asset portfolio. Heat rate contracts are contracts for the sale or purchase of power that are priced based on a natural gas index. The fair value and notional volumes of contracts for differences and the swap, option, future and heat rate contracts are shown in the tables below. Energy Asset/(Liability) 2006 2005 December 31 (millions of dollars) Accounting Fair Value Fair Value Treatment Power - swaps and contracts for differences (maturing 2007 to 2011) Hedge (179 ) (130 ) (maturing 2007 to 2010) Non-hedge (7 ) 13 Gas - swaps, futures and options (maturing 2007 to 2016) Hedge (66 ) 17 (maturing 2007 to 2008) Non-hedge 30 (11 ) Heat rate contracts Non-hedge - - 98 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Notional Volumes Power (GWh)(1) Gas (Bcf)(1) December 31, 2006 Accounting Purchases Sales Purchases Sales Treatment Power - swaps and contracts for differences (maturing 2007 to 2011) Hedge 6,654 12,349 - - (maturing 2007 to 2010) Non-hedge 1,402 964 - - Gas - swaps, futures and options (maturing 2007 to 2016) Hedge - - 77 59 (maturing 2007 to 2008) Non-hedge - - 11 15 Heat rate contracts Non-hedge - 9 - - December 31, 2005 Power - swaps and contracts for Hedge 2,566 7,780 - - differences Non-hedge 1,332 456 - - Gas - swaps, futures and options Hedge - - 91 69 Non-hedge - - 15 18 Heat rate contracts Non-hedge - 35 - - (1) Gigawatt hours (GWh); billion cubic feet (Bcf). Certain of the Company's joint ventures use power derivatives to manage energy price risk exposures. The Company's proportionate share of the fair value of these outstanding power sales derivatives at December 31, 2006 was $55 million (2005 - $(38) million) and related to contracts which cover the period 2007 to 2010. The Company's proportionate share of the notional sales volumes of power associated with this exposure at December 31, 2006 was 4,500 GWh (2005 - 2,058 GWh). Fair Value of Financial Instruments The fair value of cash and short-term investments and notes payable approximates their carrying amounts due to the short period to maturity. The fair value of long-term debt, long-term debt of joint ventures and preferred securities is determined using market prices for the same or similar issues. 2006 2005 December 31 (millions of dollars) Carrying Fair Value Carrying Fair Value Amount Amount Long-Term Debt TransCanada PipeLines Limited 8,549 9,738 7,545 9,071 NOVA Gas Transmission Ltd. 1,648 2,111 1,725 2,267 Gas Transmission Northwest Corporation 466 450 466 470 Portland Natural Gas Transmission System 263 265 281 292 TC PipeLines, LP 463 463 16 16 Tuscarora Gas Transmission Company 86 94 Other 28 28 Long-Term Debt of Joint Ventures 1,278 1,295 978 1,101 Preferred Securities 536 532 536 554 The fair value is provided solely for information purposes and is not recorded in the consolidated balance sheet. Credit Risk Credit risk results from the possibility that a counterparty to a derivative in which the Company has an unrealized gain fails to perform according to the terms of the contract. Credit exposure is minimized through the use of established credit management techniques, including formal assessment processes, contractual and collateral requirements, master netting arrangements and credit exposure limits. At December 31, 2006, for foreign currency and interest rate derivatives, total credit risk and the largest credit exposure to a single counterparty were $38 million and $11 million, respectively. At December 31, 2006, for power, natural gas and heat rate derivatives, total credit risk and the largest credit exposure to a single counterparty were $21 million and $11 million, respectively. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 99 NOTE 17 INCOME TAXES Provision for Income Taxes Year ended December 31 (millions of dollars) 2006 2005 2004 Current Canada 263 499 373 Foreign 37 51 41 300 550 414 Future Canada 104 (46 ) 34 Foreign 71 106 43 175 60 77 475 610 491 Geographic Components of Income Year ended December 31 (millions of dollars) 2006 2005 2004 Canada 1,158 1,315 1,205 Foreign 444 587 342 Income from continuing operations before income taxes and 1,602 1,902 1,547 non-controlling interests Reconciliation of Income Tax Expense Year ended December 31 (millions of dollars) 2006 2005 2004 Income from continuing operations before income taxes and 1,602 1,902 1,547 non-controlling interests Federal and provincial statutory tax rate 32.5 % 33.6 % 33.9 % Expected income tax expense 521 639 524 Income tax differential related to regulated operations 72 71 62 Higher effective foreign tax rates - 2 2 Tax rate reductions(1) (33 ) - - Large corporations tax - 15 21 Income from equity investments and non-controlling interests (27 ) (29 ) (24 ) Non-taxable portion of gains on sale of assets - (68 ) (66 ) Change in valuation allowance - - (7 ) Other(2) (58 ) (20 ) (21 ) Actual income tax expense 475 610 491 (1) In second quarter 2006, TCPL recorded a $33 million future income tax benefit as a result of reductions in future Canadian federal and provincial corporate income tax rates enacted in that quarter. (2) Includes income tax benefits of $51 million recorded in 2006 on the resolution of certain income tax matters with taxation authorities and changes in estimates. 100 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Future Income Tax Assets and Liabilities December 31 (millions of dollars) 2006 2005 Deferred costs 65 129 Other post-employment benefits 45 39 Deferred revenue 6 11 Other 47 50 163 229 Less: Valuation allowance 14 14 Future income tax assets, net of valuation allowance 149 215 Difference in accounting and tax bases of plant, equipment and PPAs 768 637 Investments in subsidiaries and partnerships 113 131 Pension benefits 59 58 Unrealized foreign exchange gains on long-term debt 39 68 Other 46 24 Future income tax liabilities 1,025 918 Net future income tax liabilities 876 703 Unremitted Earnings of Foreign Investments Income taxes have not been provided on the unremitted earnings of foreign investments which the Company does not intend to repatriate in the foreseeable future. If provision for these taxes had been made, future income tax liabilities would increase by approximately $72 million at December 31, 2006 (2005 - $61 million). Income Tax Payments Income tax payments of $494 million were made during the year ended December 31, 2006 (2005 - $530 million; 2004 - $419 million). NOTE 18 NOTES PAYABLE 2006 2005 Outstanding Weighted Outstanding Weighted December 31 Average December 31 Average Interest Rate Interest Rate Per Annum at Per Annum at December 31 December 31 (millions of (millions of dollars) dollars) Canadian dollars 467 4.3% 765 3.4% U.S. dollars (2006 - nil; 2005 - - 197 4.5% US$169) 467 962 Notes payable consists of commercial paper and line of credit drawings. At December 31, 2006, total credit facilities of $2.1 billion were available to support the Company's commercial paper programs and for general corporate purposes. Of this total, $1.5 billion was a committed five-year term syndicated credit facility. This facility is extendible on an annual basis and is revolving. In December 2006, the facility was extended to December 2011. The remaining amounts are either demand or non-extendible facilities. At December 31, 2006, the Company had used approximately $190 million of its total lines of credit for letters of credit and to support its ongoing commercial arrangements. If drawn, interest on the lines of credit is charged at prime rates of Canadian chartered and U.S. banks and at other negotiated financial bases. The cost to maintain the unused portion of the lines of credit was $2 million for the year ended December 31, 2006 (2005 - $2 million). NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 101 NOTE 19 ASSET RETIREMENT OBLIGATIONS At December 31, 2006, the estimated undiscounted cash flows required to settle the asset retirement obligations with respect to the non-regulated operations in Pipelines were $39 million (2005 - $39 million), calculated using an inflation rate ranging from two to three per cent per annum. The estimated fair value of this liability was $9 million (2005 - $4 million) after discounting the estimated cash flows at rates ranging from 5.4 per cent to 6.6 per cent. At December 31, 2006, the expected timing of payment for settlement of the obligations is 23 years. At December 31, 2006, the estimated undiscounted cash flows required to settle the asset retirement obligations with respect to the Energy business were $162 million (2005 - $114 million), calculated using an inflation rate ranging from two to three per cent per annum. The estimated fair value of this liability was $36 million (2005 - $29 million) after discounting the estimated cash flows at rates ranging from 5.4 per cent to 6.6 per cent. At December 31, 2006, the expected timing of payment for settlement of the obligations ranges from 11 to 33 years. Reconciliation of Asset Retirement Obligations (millions of dollars) Pipelines Energy Total Balance at January 1, 2004 1 8 9 New obligations and revisions in estimated cash flows 4 26 30 Removal of Power LP redemption obligations - (5) (5) Accretion expense - 2 2 Balance at December 31, 2004 5 31 36 New obligations and revisions in estimated cash flows (1) 1 - Sale of Power LP - (5) (5) Accretion expense - 2 2 Balance at December 31, 2005 4 29 33 New obligations and revisions in estimated cash flows 4 6 10 Accretion expense 1 1 2 Balance at December 31, 2006 9 36 45 NOTE 20 EMPLOYEE FUTURE BENEFITS The Company sponsors DB Plans that cover substantially all employees. Benefits provided under the DB Plans are based on years of service and highest average earnings over three consecutive years of employment, and increase annually by a portion of the increase in the Consumer Products Index (CPI). Past service costs are amortized over the expected average remaining service life of employees, which is approximately 11 years. The Company also provides its employees with post-employment benefits other than pensions, including termination benefits and defined life insurance and medical benefits beyond those provided by government-sponsored plans. Past service costs are amortized over the expected average remaining life expectancy of former employees, which at December 31, 2006 was approximately 13 years. In 2006, the Company expensed $2 million (2005 - $2 million; 2004 - $1 million) related to retirement savings plans for its U.S. employees. Total cash payments for employee future benefits for 2006, consisting of cash contributed by the Company to the DB Plans and other benefit plans was $104 million (2005 - $74 million). 102 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company measures its accrued benefit obligations and the fair value of plan assets for accounting purposes as at December 31 of each year. The most recent actuarial valuation of the pension plans for funding purposes was as of January 1, 2007, and the next required valuation is as of January 1, 2008. Pension Benefit Plans Other Benefit Plans (millions of dollars) 2006 2005 2006 2005 Change in Benefit Obligation Benefit obligation - beginning of year 1,282 1,100 148 123 Current service cost 39 32 3 3 Interest cost 65 63 8 7 Employee contributions 3 3 - - Benefits paid (64 ) (60 ) (7 ) (6 ) Actuarial loss/(gain) 53 149 (2 ) 21 Foreign exchange rate changes - (3 ) - - Plan amendment - - (18 ) - Curtailment - (2 ) - - Benefit obligation - end of year 1,378 1,282 132 148 Change in Plan Assets Plan assets at fair value - beginning of year 1,096 970 27 26 Actual return on plan assets 134 119 6 2 Employer contributions 95 67 7 5 Employee contributions 3 3 - - Benefits paid (64 ) (60 ) (7 ) (6 ) Foreign exchange rate changes - (3 ) - - Plan assets at fair value - end of year 1,264 1,096 33 27 Funded status - plan deficit (114 ) (186 ) (99 ) (121 ) Unamortized net actuarial loss 291 331 39 45 Unamortized past service costs 32 36 (12 ) 8 Accrued benefit asset/(liability), net of valuation 209 181 (72 ) (68 ) allowance of nil The accrued benefit asset/(liability) is included in the Company's balance sheet as follows. Pension Benefit Plans Other Benefit Plans (millions of dollars) 2006 2005 2006 2005 Other assets 230 268 5 4 Accounts payable - (70 ) - (7 ) Deferred amounts (21 ) (17 ) (77 ) (65 ) Total 209 181 (72 ) (68 ) Included in the above benefit obligation and fair value of plan assets at December 31 are the following amounts in respect of plans that are not fully funded. Pension Benefit Plans Other Benefit Plans (millions of dollars) 2006 2005 2006 2005 Benefit obligation (1,359 ) (1,263 ) (102 ) (124 ) Plan assets at fair value 1,243 1,075 - - Funded status - plan deficit (116 ) (188 ) (102 ) (124 ) The Company's expected contributions for the year ended December 31, 2007 are approximately $44 million for the pension benefit plans and approximately $5 million for the other benefit plans. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 103 The following are estimated future benefit payments, which reflect expected future service. (millions of dollars) Pension Other Benefits Benefits 2007 59 7 2008 62 7 2009 65 8 2010 68 8 2011 71 8 Years 2012 to 2016 406 42 The significant weighted average actuarial assumptions adopted in measuring the Company's benefit obligations at December 31 are as follows. Pension Benefit Plans Other Benefit Plans 2006 2005 2006 2005 Discount rate 5.00% 5.00% 5.20% 5.15% Rate of compensation increase 3.50% 3.50% The significant weighted average actuarial assumptions adopted in measuring the Company's net benefit plan cost for years ended December 31 are as follows. Pension Benefit Plans Other Benefit Plans 2006 2005 2004 2006 2005 2004 Discount rate 5.00% 5.75% 6.00% 5.15% 6.00% 6.25% Expected long-term rate of return on 6.90% 6.90% 6.90% 7.75% 7.20% plan assets Rate of compensation increase 3.50% 3.50% 3.50% The overall expected long-term rate of return on plan assets is based on historical and projected rates of return for both the portfolio in aggregate and for each asset class in the portfolio. Assumed projected rates of return are selected after analyzing historical experience and future expectations of the level and volatility of returns. Asset class benchmark returns, asset mix and anticipated benefit payments from plan assets are also considered in the determination of the overall expected rate of return. The discount rate is based on market interest rates of high quality bonds that match the timing and benefits expected to be paid under each plan. For measurement purposes, a nine per cent annual rate of increase in the per capita cost of covered health care benefits was assumed for 2007. The rate was assumed to decrease gradually to five per cent for 2015 and remain at that level thereafter. A one percentage point increase or decrease in assumed health care cost trend rates would have the following effects. (millions of dollars) Increase Decrease Effect on total of service and interest cost components 4 (3 ) Effect on post-employment benefit obligation 8 (7 ) 104 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company's net benefit cost is as follows. Pension Benefit Plans Other Benefit Plans Year ended December 31 (millions of 2006 2005 2004 2006 2005 2004 dollars) Current service cost 39 32 28 3 3 3 Interest cost 65 63 58 8 7 7 Actual return on plan assets (134 ) (119 ) (97 ) (6 ) (2 ) (1 ) Actuarial loss/(gain) 53 149 46 (2 ) 21 (12 ) Plan amendment - - - (18 ) - - Elements of net benefit cost prior 23 125 35 (15 ) 29 (3 ) to adjustments to recognize the long-term nature of net benefit cost Difference between expected and 63 54 39 4 - 1 actual return on plan assets Difference between actuarial loss (27 ) (131 ) (32 ) 4 (20 ) 13 recognized and actual actuarial loss on accrued benefit obligation Difference between amortization of 4 3 3 19 1 - past service costs and actual plan amendments Amortization of transitional - - - 2 2 2 obligation related to regulated business Net benefit cost recognized 63 51 45 14 12 13 The Company's pension plans' weighted average asset allocations at December 31, by asset category, and weighted average target allocation at December 31, by asset category, is as follows. Percentage of Plan Assets Target Allocation Asset Category 2006 2005 2006 Debt securities 40% 43% 35% to 60% Equity securities 60% 57% 40% to 65% 100% 100% Debt securities include the Company's debt in the amount of $4 million (0.3 per cent of total plan assets) and $3 million (0.3 per cent of total plan assets) at December 31, 2006 and 2005, respectively. Equity securities include the Company's common shares in the amounts of $6 million (0.5 per cent of total plan assets) and $5 million (0.5 per cent of total plan assets) at December 31, 2006 and 2005, respectively. The assets of the pension plans are managed on a going concern basis subject to legislative restrictions. The plans' investment policies are to maximize returns within an acceptable risk tolerance. Pension assets are invested in a diversified manner with consideration given to the demographics of the plans' participants. Employee Future Benefits of Joint Ventures In addition to these plans, certain of the Company's joint ventures sponsor DB Plans, as well as post-employment benefits other than pensions, including defined life insurance and medical benefits beyond those provided by government-sponsored plans. The obligations of these plans are non-recourse to TCPL. The amounts that follow represent TCPL's proportionate share with respect to these plans. Total cash payments for employee future benefits for 2006, consisting of cash contributed by the Company's joint ventures to DB Plans and other benefit plans was $25 million (2005 - $4 million). NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 105 The Company's joint ventures measure the benefit obligations and the fair value of plan assets for accounting purposes as at December 31 of each year. The most recent actuarial valuations of the pension plans for funding purposes were as of January 1, 2007, and the next required valuations will be as of January 1, 2008. Pension Benefit Plans Other Benefit Plans (millions of dollars) 2006 2005 2006 2005 Change in Benefit Obligation Benefit obligation - beginning of year 679 45 81 2 Current service cost 24 4 7 1 Interest cost 37 7 5 1 Employee contributions 5 - - - Benefits paid (15 ) (3 ) (2 ) - Actuarial loss 77 17 72 2 Foreign exchange rate changes - (1 ) - - Bruce B(1) - 610 - 75 Plan amendment - - 6 - Benefit obligation - end of year 807 679 169 81 Change in Plan Assets Plan assets at fair value - beginning of year 585 57 - - Actual return on plan assets 68 18 - - Employer contributions 23 4 2 - Employee contributions 5 - - - Benefits paid (15 ) (3 ) (2 ) - Foreign exchange rate changes - (1 ) - - Bruce B(1) - 510 - - Plan assets at fair value - end of year 666 585 - - Funded status - plan deficit (141 ) (94 ) (169 ) (81 ) Unamortized net actuarial loss/(gain) 174 125 66 (5 ) Unamortized past service costs - 1 6 - Accrued benefit asset/(liability), net of valuation 33 32 (97 ) (86 ) allowance of nil (1) The Company proportionately consolidated Bruce B, on a prospective basis at 31.6 per cent, effective October 31, 2005. The accrued benefit asset/(liability), net of valuation allowance of nil, is included in the Company's balance sheet as follows. Pension Benefit Plans Other Benefit Plans (millions of dollars) 2006 2005 2006 2005 Other assets 33 32 - - Deferred amounts - - (97 ) (86 ) Total 33 32 (97 ) (86 ) Included in the above benefit obligation and fair value of plan assets at December 31 are the following amounts in respect of plans that are not fully funded. Pension Benefit Plans Other Benefit Plans (millions of dollars) 2006 2005 2006 2005 Benefit obligation (773 ) (645 ) (169 ) (81 ) Plan assets at fair value 609 534 - - Funded status - plan deficit (164 ) (111 ) (169 ) (81 ) 106 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company's joint ventures' expected contributions for the year ended December 31, 2007 are approximately $33 million for the pension benefit plans and approximately $3 million for the other benefit plans. The following are estimated future benefit payments, which reflect expected future service. (millions of dollars) Pension Other Benefits Benefits 2007 13 3 2008 15 4 2009 19 4 2010 23 5 2011 27 6 Years 2012 to 2016 194 40 The significant weighted average actuarial assumptions adopted in measuring the Company's joint ventures' benefit obligations at December 31 are as follows. Pension Benefit Plans Other Benefit Plans 2006 2005 2006 2005 Discount rate 5.05% 5.30% 4.95% 5.15% Rate of compensation increase 3.50% 3.50% The significant weighted average actuarial assumptions adopted in measuring the Company's joint ventures' net benefit plan cost for years ended December 31 are as follows. Pension Benefit Plans Other Benefit Plans 2006 2005 2004 2006 2005 2004 Discount rate 5.25% 6.20% 6.00% 5.15% 6.25% 6.00% Expected long-term rate of return on 7.30% 7.40% 8.50% plan assets Rate of compensation increase 3.50% 3.50% 4.00% A one percentage point increase or decrease in assumed health care cost trend rates would have the following effects. (millions of dollars) Increase Decrease Effect on total of service and interest cost components 2 (1 ) Effect on post-employment benefit obligation 24 (20 ) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 107 The Company's proportionate share of net benefit cost of joint ventures is as follows. Pension Benefit Plans Other Benefit Plans Year ended December 31 (millions 2006 2005 2004 2006 2005 2004 of dollars) Current service cost 24 4 1 7 1 - Interest cost 37 7 3 5 1 - Actual return on plan assets (68 ) (18 ) (7 ) - - - Actuarial loss 77 17 - 72 2 - Plan amendment - - - 6 - - Elements of net benefit cost prior 70 10 (3 ) 90 4 - to adjustments to recognize the long-term nature of net benefit cost Difference between expected and 26 9 2 - - - actual return on plan assets Difference between actuarial loss (70 ) (16 ) 1 (72 ) (3 ) - recognized and actual actuarial loss on accrued benefit obligation Difference between amortization of - - - (6 ) - - past service costs and actual plan amendments Net benefit cost recognized 26 3 - 12 1 - related to joint ventures The Company's joint ventures' pension plans' weighted average asset allocations and weighted average target allocation at December 31, by asset category, are as follows. Percentage of Plan Assets Target Allocation Asset Category 2006 2005 2006 Debt securities 29% 30% 30% Equity securities 71% 70% 70% 100% 100% Debt securities include the Company's debt in the amount of $1 million (0.2 per cent of total plan assets) and $1 million (0.2 per cent of total plan assets) at December 31, 2006 and 2005, respectively. Equity securities include the Company's common shares in the amounts of $6 million (1 per cent of total plan assets) and $5 million (0.9 per cent of total plan assets) at December 31, 2006 and 2005, respectively. The assets of the pension plans are managed on a going concern basis subject to legislative restrictions. The plans' investment policies are to maximize returns within an acceptable risk tolerance. Pension assets are invested in a diversified manner with consideration given to the demographics of the plans' participants. NOTE 21 CHANGES IN OPERATING WORKING CAPITAL Year ended December 31 (millions of dollars) 2006 2005 2004 (Increase)/decrease in accounts receivable (186 ) (100 ) 15 Increase in inventories (108 ) (50 ) - (Increase)/decrease in other current assets (6 ) (1 ) 24 (Decrease)/increase in accounts payable (41 ) 98 (4 ) Increase/(decrease) in accrued interest 41 5 (7 ) (300 ) (48 ) 28 108 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 22 COMMITMENTS, CONTINGENCIES AND GUARANTEES Commitments Operating leases Future annual payments, net of sub-lease receipts, under the Company's operating leases for various premises, services, equipment and a natural gas storage facility are approximately as follows. Year ended December 31 (millions of dollars) Minimum Amounts Recoverable Net Lease under Sub-Leases Payments Payments 2007 52 (13 ) 39 2008 54 (13 ) 41 2009 54 (12 ) 42 2010 53 (12 ) 41 2011 55 (12 ) 43 2012 and thereafter 731 (18 ) 713 Total 999 (80 ) 919 The operating lease agreements for premises, services and equipment expire at various dates through 2016, with an option to renew certain lease agreements for three to five years. The operating lease agreement for the natural gas storage facility expires in 2030 with lessee termination rights every fifth anniversary commencing in 2010 and with the lessor having the right to terminate the agreement every five years commencing in 2015. Net rental expense on operating leases for the year ended December 31, 2006 was $25 million (2005 - $17 million; 2004 - $7 million). Bruce Power TCPL's share of Bruce A's signed commitments to third party suppliers for the next four years for the restart and refurbishment of the currently idle Units 1 and 2, extending the operating life of Unit 3 by replacing its steam generators and fuel channels when required, and replacing the steam generators on Unit 4, is as follows. Year ended December 31 (millions of dollars) 2007 450 2008 164 2009 71 2010 1 2011 - 686 In addition to these capital commitments, the Company is committed to capital expenditures of approximately $1.2 billion for the construction of its Halton Hills, Portlands Energy and remaining Cartier Wind projects. TCPL has guaranteed the performance of all obligations of PipeLines LP with respect to its acquisition of a 46.45 per cent interest in Great Lakes pursuant to the purchase agreement. Aboriginal Pipeline Group On June 18, 2003, the Mackenzie Delta gas producers, the APG and TCPL reached an agreement which governs TCPL's role in the MGP Project. The project would result in a natural gas pipeline being constructed from Inuvik, Northwest Territories, to the northern border of Alberta, where it would connect with the Alberta System. Under the agreement, TCPL agreed to finance the APG for its one-third share of project development costs. These costs are currently forecasted to be approximately $145 million by the end of 2007. Contingencies The Canadian Alliance of Pipeline Landowners' Associations (CAPLA) and two individual landowners commenced an action in 2003 under Ontario's Class Proceedings Act, 1992, against TCPL and Enbridge Inc. for damages of $500 million alleged to arise from the creation of a control zone within 30 metres of the pipeline pursuant to Section 112 of the NEB Act. In November 2006, TCPL and Enbridge Inc. were granted a dismissal of the case but CAPLA has appealed that decision. The Company continues to believe the claim is without merit and will vigorously defend the action. The Company has made no provision for any potential liability. A liability, if any, would be dealt with through the regulatory process. The Company and its subsidiaries are subject to various other legal proceedings and actions arising in the normal course of business. While the final outcome of such legal proceedings and actions cannot be predicted with certainty, it is the opinion of Management that the resolution of such proceedings and actions will not have a material impact on the Company's consolidated financial position or results of operations. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 109 Guarantees The Company, together with Cameco Corporation and BPC Generation Infrastructure Trust (BPC), has severally guaranteed one-third of certain contingent financial obligations of Bruce B related to power sales agreements, operator licenses, the lease agreement and contractor services. The terms of the guarantees range from 2007 to 2018. As part of the reorganization of Bruce Power in 2005, including the formation of Bruce A and the commitment to restart and refurbish the Bruce A units, the Company, together with BPC, severally guaranteed one-half of certain contingent financial obligations of Bruce A related to the refurbishment agreement with the Ontario Power Authority and cost sharing and sublease agreements with Bruce B. The terms of the guarantees range from 2019 to 2036. TCPL's share of the exposure under these Bruce Power guarantees at December 31, 2006 was estimated to be approximately $586 million to a calculated maximum of $658 million. The current carrying amount of the liability related to these guarantees is nil and the fair value is approximately $17 million. TCPL has guaranteed the equity undertaking of a subsidiary which supports the payment, under certain conditions, of principal and interest on US$105 million of public debt obligations of TransGas. The Company has a 46.5 per cent interest in TransGas. Under the terms of the agreement, the Company severally with another major multinational company may be required to fund more than their proportionate share of debt obligations of TransGas in the event that the minority shareholders fail to contribute. Any payments made by TCPL under this agreement convert into share capital of TransGas. The potential exposure is contingent on the impact of any change of law on TransGas' ability to service the debt. From the issuance of the debt in 1995 to date, there has been no change in applicable law and thus no exposure to TCPL. The debt matures in 2010. The Company has made no provision related to this guarantee. In connection with the acquisition of GTN, US$241 million of the purchase price was deposited into an escrow account. At December 31, 2006, there was US$24 million remaining in the escrow account which represented the full face amount of the potential liability under certain GTN guarantees. In February 2007, the funds were released and a portion of the monies were used to satisfy the liability of GTN under these designated guarantees. NOTE 23 DISCONTINUED OPERATIONS TCPL's net income for the year ended December 31, 2006 includes $28 million or $0.06 per share of net income from discontinued operations reflecting settlements received from bankruptcy claims related to TCPL's Gas Marketing business divested in 2001 (2005 - nil; 2004 - $52 million net of $27 million of income taxes) NOTE 24 SUBSEQUENT EVENTS On February 22, 2007, TCPL closed the acquisition of the American Natural Resources Company and the ANR Storage Company (together ANR), and an additional 3.55 per cent interest in Great Lakes from El Paso Corporation for approximately US$3.4 billion, subject to certain post-closing adjustments, including approximately US$488 million of assumed long-term debt. The acquisition was financed with a combination of proceeds from the Company's issuance of $1.3 billion of common shares, cash on hand and funds drawn on existing and newly established loan facilities, discussed below. In February 2007, TCPL issued $1.3 billion of common shares to TransCanada to partially finance the acquisition of ANR. In February 2007, the Company through a wholly owned subsidiary, executed an agreement with a syndicate of banks to establish a new US$1.0 billion credit facility, consisting of a US$700 million five-year term loan and a US$300 million five-year extendible revolving facility. This facility is committed and unsecured. The Company utilized US$1.0 billion from this facility and an additional US$100 million from an existing demand line to partially finance the ANR acquisitions as well addtional investments in PipeLines LP; described below. Great Lakes Acquisition On February 22, 2007, PipeLines LP closed its acquisition of a 46.45 per cent interest in Great Lakes from El Paso Corporation for approximately US$962 million, which included approximately US$212 million of assumed long-term debt, subject to certain post-closing adjustments. At December 31, 2006, TCPL had a 13.4 per cent interest in PipeLines LP. In February 2007, PipeLines LP increased the size of its syndicated revolving credit and term loan agreement from US$410 million to US$950 million. Incremental draws of approximately US$126 million received under this agreement were used to partially finance PipeLines LP's Great Lakes acquisition. On February 22, 2007, PipeLines LP completed a private placement offering of 17,356,086 common units at a price of US$34.57 per unit, of which 50 per cent of the units were acquired by TCPL, for US$300 million. TCPL also invested an additional approximately US$12 million to maintain its general partnership interest in PipeLines LP. As a result of TCPL's additional investments in PipeLines LP, its ownership in PipeLines LP increased to 32.1 per cent. The total private placement resulted in gross proceeds to PipeLines LP of approximately US$612 million, which were used to partially finance its Great Lakes acquisition. As a result of TCPL's increased ownership in PipeLines LP, TCPL's effective ownership in Tuscarora, Northern Border and Great Lakes increased to 32.5 per cent (including one per cent held directly), 16.1 per cent and 68.5 per cent, respectively. 110 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEVEN YEAR FINANCIAL HIGHLIGHTS (millions of dollars except where 2006 2005 2004 2003 2002 2001 2000 indicated) Income Statement Revenues 7,520 6,124 5,497 5,636 5,225 5,285 4,384 Net income from continuing 1,071 1,230 1,000 823 769 708 663 operations Net income 1,099 1,230 1,052 873 769 641 724 Net income/(loss) by segment Pipelines 560 679 584 625 639 572 613 Energy 452 566 398 217 160 181 95 Corporate 37 (37 ) (4 ) (41 ) (52 ) (67 ) (80 ) Continuing operations 1,049 1,208 978 801 747 686 628 Discontinued operations 28 - 52 50 - (67 ) 61 Net income applicable to common 1,077 1,208 1,030 851 747 619 689 shares Cash Flow Statement Funds generated from operations 2,374 1,950 1,701 1,822 1,843 1,625 1,484 (Increase)/decrease in operating (300 ) (48 ) 28 93 92 (487 ) 437 working capital Net cash provided by continuing 2,074 1,902 1,729 1,915 1,935 1,138 1,921 operations Capital expenditures and (2,042 ) (2,071 ) (2,046 ) (965 ) (851 ) (1,082 ) (1,144 ) acquisitions Disposition of assests, net of 23 671 410 - - 1,170 2,233 current tax Dividends on common and preferred (639 ) (608 ) (574 ) (532 ) (488 ) (440 ) (458 ) shares Balance Sheet Assets Plant, property and equipment Pipelines 17,141 16,528 17,306 16,064 16,158 16,562 16,937 Energy 4,302 3,483 1,421 1,368 1,340 1,116 776 Corporate 44 27 37 50 64 66 111 Total assets Continuing operations 25,908 24,113 22,414 20,873 20,416 20,255 20,238 Discontinued operations - - 7 11 139 276 5,007 25,908 24,113 22,421 20,884 20,555 20,531 25,245 Capitalization Long-term debt 10,887 9,640 9,749 9,516 8,899 9,444 10,008 Long-term debt of joint ventures 1,136 937 808 741 1,193 1,262 1,280 Preferred securities 536 536 554 598 944 950 1,208 Non-controlling interests 366 394 311 324 288 286 257 Preferred shares 389 389 389 389 389 389 389 Common shareholders' equity 7,618 7,164 6,484 6,044 5,747 5,426 5,211 SUPPLEMENTARY INFORMATION 111 Per Common Share Data (dollars) Net income - Basic Continuing operations $2.17 $2.50 $2.03 $1.66 $1.56 $1.44 $1.32 Discontinued operations 0.06 - 0.11 0.11 - (0.14 ) 0.13 $2.23 $2.50 $2.14 $1.77 $1.56 $1.30 $1.45 Net income - Diluted Continuing operations $2.17 $2.50 $2.03 $1.66 $1.55 $1.44 $1.32 Discontinued operations 0.06 - 0.11 0.11 - (0.14 ) 0.13 $2.23 $2.50 $2.14 $1.77 $1.55 $1.30 $1.45 Dividends declared $1.28 $1.23 $1.17 $1.08 $1.00 $0.90 $0.80 Per Preferred Share Data (dollars) Series U Cumulative First $2.80 $2.80 $2.80 $2.80 $2.80 $2.80 $2.80 Preferred Shares Series Y Cumulative First $2.80 $2.80 $2.80 $2.80 $2.80 $2.80 $2.80 Preferred Shares Financial Ratios Earnings to fixed charges(1) 2.6 2.9 2.5 2.3 2.3 2.1 1.9 (1) The ratio of earnings to fixed charges is determined by dividing the financial charges incurred by the company (including capitalized interest) into its income from continuing operations before financial charges and income taxes, excluding undistributed income from equity investees. 112 SUPPLEMENTARY INFORMATION ,G427317.JPG ,G918433.JPG TRANSCANADA PIPELINES LIMITED RECONCILIATION TO UNITED STATES GAAP December 31, 2006 AUDIT REPORT ON RECONCILIATION TO UNITED STATES GAAP To the Board of Directors of TransCanada PipeLines Limited On February 22, 2007, we reported on the consolidated balance sheets of TransCanada PipeLines Limited as at December 31, 2006 and 2005 and the consolidated statements of income, retained earnings and cash flows for each of the years in the three-year period ended December 31, 2006 which are included in the Annual Report on Form 40-F. In connection with our audits conducted in accordance with Canadian generally accepted auditing standards and also in accordance with the Standards of the Public Company Accounting Oversight Board (United States) of the afore-mentioned consolidated financial statements, we also have audited the related supplemental note entitled "Reconciliation to United States GAAP" included in the Form 40-F. This supplemental note is the responsibility of the Company's management. Our responsibility is to express an opinion on this supplemental note based on our audits. In our opinion, such supplemental note, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/ KPMG LLP Chartered Accountants Calgary, Canada February 22, 2007 TRANSCANADA PIPELINES LIMITED RECONCILIATION TO UNITED STATES GAAP The 2006 audited consolidated financial statements of TransCanada Pipelines Limited (TCPL or the Company) have been prepared in accordance with Canadian generally accepted accounting principles (GAAP), which in some respects, differ from U.S. GAAP. The effects of these differences on the Company's consolidated financial statements for the year ended December 31, 2006 are provided in the following U.S. GAAP condensed consolidated financial statements which should be read in conjunction with TCPL's 2006 audited consolidated financial statements prepared in accordance with Canadian GAAP. Condensed Statement of Consolidated Income and Comprehensive Income in Accordance with U.S. GAAP(1) Year ended December 31 (millions of dollars) 2006 2005 2004 Revenues 5,997 5,333 5,014 Plant operating costs and other 1,922 1,730 1,618 Commodity purchases resold 1,369 904 777 Depreciation 897 924 857 4,188 3,558 3,252 1,809 1,775 1,762 Other (income)/expenses Income from equity investments(1) (478 ) (458 ) (402 ) Other expenses(2)(3) 745 401 852 Dilution gain(3) - - (40 ) Income taxes 472 607 490 739 550 900 Income from continuing operations - U.S. GAAP 1,070 1,225 862 Net income from discontinued operations - U.S. GAAP 28 - 52 Net Income in Accordance with U.S. GAAP 1,098 1,225 914 Adjustments affecting comprehensive income under U.S. GAAP Foreign currency translation adjustment, net of tax (1 ) (18 ) (31 ) Changes in minimum pension liability, net of tax(4) 63 (51 ) 72 Change in funding of postretirement plan liability, net of tax(4) (78 ) - - Changes in equity investment postretirement plan liability, net of tax(4) (154 ) - - Unrealized (loss)/gain on derivatives, net of tax(5) (24 ) (54 ) 1 Comprehensive Income in Accordance with U.S. GAAP 904 1,102 956 Reconciliation of Income from Continuing Operations Year ended December 31 (millions of dollars) 2006 2005 2004 Net Income from Continuing Operations in Accordance with Canadian GAAP 1,071 1,230 1,000 U.S. GAAP adjustments Unrealized gain/(loss) on energy contracts(5) (6 ) (14 ) 10 Tax impact of unrealized gain/(loss) on energy contracts 3 5 (3 ) Equity investment gain/(loss)(6)(7) 1 5 (2 ) Tax impact of equity investment gain/(loss) - (1 ) - Unrealized gain/(loss) on foreign exchange and interest rate derivatives(5) 1 1 (12 ) Tax impact of gain/(loss) on foreign exchange and interest rate derivatives - (1 ) 4 Amortization of deferred gains related to Power LP(3) - - (3 ) Deferred gains related to Power LP(3) - - (132 ) Income from Continuing Operations in Accordance with U.S. GAAP 1,070 1,225 862 Condensed Statement of Consolidated Cash Flows in Accordance with U.S. GAAP(1) Year ended December 31 (millions of dollars) 2006 2005 2004 Cash Generated from Operations(8) Net cash provided by operating activities 1,885 1,627 1,617 Investing Activities Net cash used in investing activities (1,920 ) (1,169 ) (1,356 ) Financing Activities Net cash provided by/(used in) financing activities 234 (514 ) (340 ) Effect of Foreign Exchange Rate Changes on Cash and Short-Term Investments 7 13 (87 ) Increase/(Decrease) in Cash and Short-Term Investments 206 (43 ) (166 ) Cash and Short-Term Investments Beginning of year 83 126 292 Cash and Short-Term Investments End of year 289 83 126 Condensed Balance Sheet in Accordance with U.S. GAAP(1) December 31 (millions of dollars) 2006 2005 Current assets(9) 1,550 1,058 Long-term investments(4)(6)(7) 2,922 2,168 Plant, property and equipment 17,430 17,348 Regulatory asset(4)(10) 2,199 2,601 Other assets(4)(6) 1,720 2,028 25,821 25,203 Current liabilities(4)(11) 2,623 2,797 Deferred amounts(4)(5)(7) 986 1,298 Long-term debt(5) 10,913 9,675 Deferred income taxes(4)(10) 2,734 3,102 Preferred securities 536 536 Non-controlling interests 366 394 Shareholders' equity(4) 7,663 7,401 25,821 25,203 Statement of Other Comprehensive Income in Accordance with U.S. GAAP (millions of dollars) Under-funded Cumulative Minimum Cash Flow Total Postretirement Translation Pension Hedges Plan Liability Account Liability (SFAS No. (SFAS No. 158) (SFAS No. 133) 87) Balance at January 1, 2004 - (40 ) (98 ) (5 ) (143 ) Changes in minimum pension liability, net of tax - - 72 - 72 of $(39)(4) Unrealized gain on derivatives, net of tax of $ - - - 1 1 (3)(5) Foreign currency translation adjustment, net of - (31 ) - - (31 ) tax of $(44) Balance at December 31, 2004 - (71 ) (26 ) (4 ) (101 ) Changes in minimum pension liability, net of tax - - (51 ) - (51 ) of $27(4) Unrealized loss on derivatives, net of tax of - - - (54 ) (54 ) $28(5) Foreign currency translation adjustment, net of - (18 ) - - (18 ) tax of $(21) Balance at December 31, 2005 - (89 ) (77 ) (58 ) (224 ) Change in minimum pension liability, net of tax - - 63 - 63 of $(35)(4) Reversal of minimum pension liability, due to (14 ) - 14 - - adoption of SFAS No 158 Change in funding of postretirement plan (78 ) - - - (78 ) liability, net of tax of $35(4) Change in equity investment postretirement plan (154 ) - - - (154 ) liability, net of tax of $70(4) Unrealized gain on derivatives, net of tax of - - - (24 ) (24 ) $11(5) Foreign currency translation adjustment, net of - (1 ) - - (1 ) tax of $1 Balance at December 31, 2006 (246 ) (90 ) - (82 ) (418 ) ------- (1) In accordance with U.S. GAAP, the Condensed Statement of Consolidated Income, Statement of Consolidated Cash Flows, Consolidated Balance Sheet and Statement of Other Comprehensive Income of TCPL are prepared using the equity method of accounting for joint ventures. (2) Other expenses include an allowance for funds used during construction of $9 million for the year ended December 31, 2006 (2005 - $3 million; 2004 - $3 million). (3) The Company recorded its investment in TransCanada Power, L.P. (Power LP) using the proportionate consolidation method for Canadian GAAP purposes and as an equity investment for U.S. GAAP purposes. During the period from 1997 to April 2004, the Company was obligated to fund the redemption of Power LP units in 2017. As a result, under Canadian GAAP, TCPL accounted for the issuance of units by Power LP to third parties as a sale of a future net revenue stream and the resulting gains were deferred and amortized to income over the period to 2017. The redemption obligation was removed in April 2004 and the unamortized gains were recognized as income. Under U.S. GAAP, any such gains in the period from 1997 to April 2004 are characterized as dilution gains and, because the Company was committed to fund the redemption of the units, the gains are recorded, on an after-tax basis, as equity transactions in shareholders' equity. The Company's accounting policy for dilution gains is to record them as income for both Canadian and U.S. GAAP purposes, however, U.S. GAAP requires such gains to be recorded directly in equity if there is a contemplation of reacquisition of units. With the removal of the redemption obligation in April 2004, subsequent issuances of units by Power LP are accounted for as dilution gains in income for both Canadian and U.S. GAAP purposes. (4) In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 158 "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans" which amended FASB Statements No. 87, 88, 106 and 132(R). For the Company's U.S. GAAP financial statements, SFAS No. 158 became effective for as at December 31, 2006. Retrospective application of SFAS No. 158 is not permitted. SFAS No. 158 requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status, through comprehensive income, in the year in which the changes occur. The amounts recognized in the Company's balance sheet as at December 31, 2006 are as follows. December 31 (millions of dollars) 2006 Non-current assets 10 Current liabilities 5 Non-current liabilities 220 215 Pre-tax amounts recognized in accumulated other comprehensive income are as follows. December 31 (millions of dollars) Pension Other Benefits Benefits 2006 2006 Net loss 92 14 Prior service cost (credit) 11 (4 ) 103 10 The funded status based on the accumulated benefit obligation for all defined benefit pension plans as at December 31, 2006 is as follows. December 31 (millions of dollars) 2006 2005 Accumulated benefit obligation 1,167 1,123 Fair value of plan assets 1,264 1,096 Funded Status - surplus/(deficit) 97 (27 ) Included in the above accumulated benefit obligation and fair value of plan assets as at December 31, 2006 are the following amounts in respect of plans that are not fully funded. December 31 (millions of dollars) 2006 2005 Accumulated benefit obligation 67 1,105 Fair value of plan assets 65 1,075 Funded Status - (deficit) (2 ) (30 ) The estimated net loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $9 million and $1 million, respectively. The estimated prior service credit for the other defined benefit postretirement plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $1 million. Incremental Effect of Applying SFAS No. 158 on Individual Line Items in the Balance Sheet December 31, 2006 (millions of dollars) Before Adjustments After Application Application of SFAS 158 of SFAS 158 Long-term investments 3,076 (154 ) 2,922 Regulatory asset 1,961 238 2,199 Other assets 1,945 (225 ) 1,720 Current liabilities 2,618 5 2,623 Deferred amounts 865 121 986 Deferred income taxes 2,769 (35 ) 2,734 Accumulated other comprehensive income (186 ) (232 ) (418 ) Total shareholders' equity 7,895 (232 ) 7,663 Pursuant to Statement of Financial Accounting Standards (SFAS) No. 87 "Employers' Accounting for Pensions", a net loss recognized as an additional pension liability and not yet recognized as net period pension cost must be recorded as a component of comprehensive income. As a result of recording an additional pension liability, the amounts recognized in the Company's balance sheet as at December 31, 2005 are as follows. The loss for 2006 is included in the amounts in the table above. December 31 (millions of dollars) 2005 Prepaid benefit cost 6 Regulatory asset 107 Other assets 37 Accounts payable (70 ) Deferred amounts (17 ) Accumulated other comprehensive income 118 Net amount recognized 181 The accumulated benefit obligation for the Company's defined benefit pension plans was $1,167 million at December 31, 2006 (2005 - $1,123 million). The rate used to discount pension and other post-retirement benefit plan obligations was based on a yield curve from Moody's corporate AA bond yields at December 31, 2006 developed by our third party actuary. This yield curve is used to develop spot rates that vary based on the duration of the obligations. The estimated future cash flows for the pension and other post retirement obligations were matched to the corresponding rates on the yield curve to derive a weighted average discount rate. (5) All foreign exchange and interest rate derivatives are recorded in the Company's consolidated financial statements at fair value under Canadian GAAP. Under the provisions of SFAS No. 133 "Accounting for Derivatives and Hedging Activities", all derivatives are recognized as assets and liabilities on the balance sheet and measured at fair value. For derivatives designated as fair value hedges, changes in the fair value are recognized in earnings together with an equal or lesser amount of changes in the fair value of the hedged item attributable to the hedged risk. For derivatives designated as cash flow hedges, changes in the fair value of the derivative that are effective in offsetting the hedged risk are recognized in other comprehensive income until the hedged item is recognized in earnings. Any ineffective portion of the change in fair value is also recognized in earnings each period. Substantially all of the amounts recorded in 2006, 2005 and 2004 as differences between U.S. and Canadian GAAP, for income from continuing operations, relate to the differences in accounting treatment with respect to the hedged item and, for comprehensive income, relate to cash flow hedges. During 2006, under the provisions of SFAS 133, net gains of $6 million (2005 - $8 million; 2004 - $10 million) from the hedges of changes in the fair value of long-term debt, and net losses of $5 million (2005 - $8 million; 2004 - $18 million) in the fair value of the hedged item were included in earnings for U.S. GAAP purposes as an adjustment to interest expense and foreign exchange losses. No amounts of the derivatives' gains or losses were excluded from the assessment of hedge effectiveness in fair value hedging relationships. No significant amounts were included in income in 2006, 2005 and 2004 with respect to ineffectiveness of cash flow hedges. For amounts included in other comprehensive income at December 31, 2006, nil (2005 - $4 million; 2004 - $(4) million) relates to the hedging of interest rate risk; $(1) million (2005 - $(1) million; 2004 - $3 million) relates to the hedging of foreign exchange rate risk; and $(23) million (2005 - $(57) million; 2004 - $2 million) relates to the hedging of energy price risk. In 2007, $(66) million is expected to be recorded in earnings. At December 31, 2006, assets of $160 million (2005 - $175 million) and liabilities of $69 million (2005 - $110 million) were reduced for U.S. GAAP purposes to reflect the fair value of derivatives and the corresponding change in the fair value of hedged items. (6) Under Canadian GAAP, pre-operating costs incurred during the commissioning phase of a new project are deferred until commercial production levels are achieved. After such time, those costs are amortized over the estimated life of the project. Under U.S. GAAP, such costs are expensed as incurred. Certain start-up costs incurred by Bruce Power L.P. (Bruce B), an equity investment, were expensed under U.S. GAAP. Under both Canadian GAAP and U.S. GAAP, interest is capitalized on expenditures relating to construction of development projects actively being prepared for their intended use. In Bruce B, under U.S. GAAP, the carrying value of development projects against which interest is capitalized is lower due to the expensing of certain pre-operating costs. (7) Financial Interpretation (FIN) 45 requires the recognition of a liability for the fair value of certain guarantees that require payments contingent on specified types of future events. The measurement standards of FIN 45 are applicable to guarantees entered into after January 1, 2003. For U.S. GAAP purposes, the fair value of guarantees recorded as a liability at December 31, 2006 was $17 million (2005 - $17 million) and relates to the Company's equity interest in Bruce B and Bruce Power A L.P. The net income impact with respect to the guarantees for the year ended December 31, 2006 was $1 million (2005 - $1 million; 2004 - nil). (8) In accordance with U.S. GAAP, all current taxes are included in cash generated from operations. (9) Current assets at December 31, 2006 include derivative contracts of $18 million (2005 - $49 million) and hedging deferrals of $131 million (2005 - $93 million). (10) Under U.S. GAAP, the Company is required to record a deferred income tax liability for its cost-of-service regulated businesses. As these deferred income taxes are recoverable through future revenues, a corresponding regulatory asset is recorded for U.S. GAAP purposes. (11) Current liabilities at December 31, 2006 include dividends payable of $162 million (2005 - $154 million), current taxes payable of $71 million (2005 - $251 million), derivative contracts of $133 million (2005 - $95 million) and hedging deferrals of $15 million (2005 - $44 million). Income Taxes The income tax effects of differences between the accounting value and the tax value of assets and liabilities are as follows. December 31 (millions of dollars) 2006 2005 Deferred Tax Liabilities Difference in accounting and tax bases of plant, equipment and power purchase arrangements 1,478 1,718 Taxes on future revenue requirement 606 874 Investments in subsidiaries and partnerships 683 561 Pension Benefit 25 15 Other 127 143 2,919 3,311 Deferred Tax Assets Deferred amounts 71 140 Other Post-employment benefits 16 13 Other 112 70 199 223 Less: Valuation allowance 14 14 185 209 Net deferred tax liabilities 2,734 3,102 Other In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123 (revised 2004) "Share-Based Payment" which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The pro forma disclosures previously permitted under SFAS No. 123 will no longer be an alternative to financial statement recognition. In 2002, TCPL adopted accounting for its stock-based compensation plans using the fair value recognition provisions under Canadian GAAP. Therefore, adopting the provisions under SFAS No 123 (revised 2004) had no impact on the U.S. GAAP financial statements of the Company. In March 2005, FASB issued a Staff Position (FSP) on a previously issued FIN. The provisions of FSP FIN 46 (R)-5 "Implicit Variable Interests under revised FIN 46(R), Consolidation of Variable Interest Entities" require that a reporting enterprise consider consolidating implicit variable interests when applying the provisions of FIN 46(R). Adopting these provisions had no impact on the U.S. GAAP financial statements of the Company. In March 2005, FASB issued FIN 47 "Accounting for Conditional Asset Retirement Obligations - an interpretation of FASB No.143". FIN 47 clarifies that the term "conditional asset retirement obligation" as used in SFAS No. 143, refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. It also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. Adopting the clarification under this interpretation had no impact on the U.S. GAAP financial statements of the Company. In May 2005, FASB issued SFAS No. 154 "Accounting Changes and Error Corrections - a replacement of APB Opinion No. 20 and SFAS No. 3" which was effective for fiscal years beginning after December 15, 2005. SFAS No. 154 changes the requirements for the accounting for and reporting of a change in accounting principle and error correction. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. Adopting the provisions under SFAS No. 154 as of January 1, 2006 had no impact on the U.S. GAAP financial statements of the Company. In February 2006, FASB issued SFAS No. 155 "Accounting for Certain Hybrid Financial Instruments - an amendment of SFAS No. 133 and 140" which is effective for fiscal years beginning after September 15, 2006. SFAS No. 155 permits fair value remeasurement of any hybrid instrument that contains an embedded derivative that otherwise would require bifurcation. TCPL is in the process of assessing the impact of the application of SFAS 155 on its U.S. GAAP financial statements. In March 2006, FASB issued SFAS No. 156 "Accounting for Servicing of Financial Assets - an amendment of FASB Statement No. 140" which is effective for fiscal years beginning after September 15, 2006. SFAS No. 156 requires recognition of a servicing asset or liability when an entity enters into arrangements to service financial instruments in certain situations. Such servicing assets or servicing liabilities are required to be initially measured at fair value, if practicable. SFAS No. 156 also allows an entity to subsequently measure its servicing assets or servicing liabilities using either an amortization method or a fair value method. Adopting the provisions under SFAS No. 156 as of January 1, 2007 is not expected to have an impact on the U.S. GAAP financial statements of the Company. In July 2006, FASB issued FIN 48 "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109" which is effective for fiscal years beginning after December 15, 2006. This Interpretation provides guidance for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. Adopting the provisions under FIN 48, as of January 1, 2007 is not expected to have a material impact on the U.S. GAAP financial statements of the Company. In September 2006, FASB issued SFAS No. 157 "Fair Value Measurements" which is effective for fiscal years beginning after November 15, 2007. This statement defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. TCPL is in the process of assessing the impact of the application of SFAS No. 157 on its U.S. GAAP financial statements. In September 2006, FASB issued SFAS No. 158 "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and 132(R)", which is effective for fiscal years ending after December 15, 2006. This statement requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability on its balance sheet and to recognize changes in the funded status in the year in which the changes occur through comprehensive income. The plan assets and benefit obligations will be measured as of the balance sheet date. The impact of adopting SFAS No. 158 is shown in the footnotes to the Statement of Other Comprehensive Income in Accordance with U.S. GAAP. In September 2006, the SEC staff issued SAB Topic 1N, "Financial Statements - Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements" (SAB No. 108), which addresses how to quantify the effect of an error on the financial statements. SAB No. 108 is effective for fiscal years ending December 31, 2006. Adopting these provisions did not have an impact on the U.S. GAAP financial statements of the company. Summarized Financial Information of Long-Term Investments The following summarized financial information of long-term investments includes those investments that are accounted for by the equity method under U.S. GAAP (including those that are accounted for by the proportionate consolidation method under Canadian GAAP). Year ended December 31 (millions of dollars) 2006 2005 2004 Income Revenues 1,450 1,233 1,249 Plant operating costs and other (697 ) (508 ) (594 ) Depreciation (175 ) (173 ) (173 ) Financial charges and other (100 ) (94 ) (80 ) Proportionate share of income before income taxes of long-term investments 478 458 402 December 31 (millions of dollars) 2006 2005 Balance Sheet Current assets 446 456 Plant, property and equipment 4,177 3,365 Other assets (net) 198 - Current liabilities (445 ) (319 ) Deferred amounts (net) (235 ) (73 ) Non-recourse debt (1,266 ) (1,236 ) Deferred income taxes 47 (25 ) Proportionate share of net assets of long-term investments 2,922 2,168 The distributed earnings from long-term investments for the year ended December 31, 2006 were $494 million (2005 - $371 million; 2004 - $258 million). The undistributed earnings from long-term investments for the year ended December 31, 2006 were $836 million (2005 - $820 million; 2004 - $767 million). MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING The management of TransCanada PipeLines Limited ("TCPL") is responsible for establishing and maintaining adequate internal control over financial reporting, and have designed such internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian generally accepted accounting principles (GAAP), including a reconciliation to United States GAAP. Management has used the Internal Control - Integrated Framework to evaluate the effectiveness of internal control over financial reporting, which is a recognized and suitable framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management has evaluated the design and operation of TCPL's internal control over financial reporting as of December 31, 2006, and has concluded that such internal control over financial reporting is effective. There are no material weaknesses that have been identified by management in this regard. KPMG LLP, the independent auditors appointed by the shareholders of TCPL, who have audited the consolidated financial statements of TCPL, have also audited management's assessment of internal controls over financial reporting and have issued the report entitled "Audit Report of Independent Registered Public Accounting Firm". February 22, 2007 /s/ HAROLD N. KVISLE Harold N. Kvisle /s/ GREGORY A. LOHNES Gregory A. Lohnes President and Executive Vice-President and Chief Executive Officer and Chief Financial Officer AUDIT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors of TransCanada PipeLines Limited We have audited management's assessment, included in the accompanying management's report of internal control over financial reporting, that TransCanada PipeLines Limited maintained effective internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for maintaining effective internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and the receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, management's assessment that the Company maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of Treadway Commission (COSO). Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of Treadway Commission (COSO). We also have conducted our audits on the consolidated financial statements in accordance with Canadian generally accepted auditing standards. With respect to the years ended December 31, 2006 and 2005, we also have conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our report dated February 22, 2007 expressed an unqualified opinion on those consolidated financial statements. /s/ KPMG LLP Chartered Accountants Calgary, Canada February 22, 2007 COMMENTS BY AUDITORS FOR UNITED STATES READERS ON CANADA-UNITED STATES REPORTING DIFFERENCES To the Board of Directors of TransCanada PipeLines Limited In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) that refers to the audit report on the effectiveness of the Company's internal control over financial reporting. Our report to the shareholders dated February 22, 2007 is expressed in accordance with Canadian reporting standards, which do not require a reference to the audit report on the effectiveness of the Company's internal control over financial reporting in the financial statement auditors' report. /s/ KPMG LLP Chartered Accountants Calgary, Canada February 22, 2007 QuickLinks TRANSCANADA PIPELINES LIMITED ANNUAL INFORMATION FORM FEBRUARY 22, 2007 TABLE OF CONTENTS TABLE OF CONTENTS /TEXT /DOCUMENT DOCUMENT TYPE EX-23.1 DESCRIPTION EXHIBIT 23.1 FILENAME a2176383zex-23_1.htm TEXT QuickLinks -- Click here to rapidly navigate through this document Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To: The Board of Directors TransCanada PipeLines Limited We consent to the inclusion in this Annual Report on Form 40-F of: * our audit report dated February 22, 2007 on the consolidated balance sheets of TransCanada PipeLines Limited ("the Company") as at December 31, 2006 and 2005, and the consolidated statements of earnings, retained earnings and cash flows for each of the years in the three-year period ended December 31, 2006, * our audit report on the Reconciliation to United States GAAP dated February 22, 2007, * our Comments by Auditors for United States Readers on Canada - United States Reporting Differences, dated February 22, 2007, * our Report of Independent Registered Public Accounting Firm dated February 22, 2007 on management's assessment of the effectiveness of internal control over financial reporting as of December 31, 2006 and the effectiveness of internal control over financial reporting as of December 31, 2006, each of which is contained (incorporated by reference) in this Annual Report on Form 40-F of the Company for the fiscal year ended December 31, 2006. /s/ KPMG LLP Chartered Accountants Calgary, Canada February 27, 2007 QuickLinks Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM /TEXT /DOCUMENT DOCUMENT TYPE EX-31.1 DESCRIPTION EXHIBIT 31.1 FILENAME a2176383zex-31_1.htm TEXT QuickLinks -- Click here to rapidly navigate through this document Exhibit 31.1 Certifications I, Harold N. Kvisle, certify that: 1. I have reviewed this annual report on Form 40-F of TransCanada PipeLines Limited; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15 (f)) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated February 28, 2007 /s/ HAROLD N. KVISLE Harold N. Kvisle President and Chief Executive Officer QuickLinks Exhibit 31.1 /TEXT /DOCUMENT DOCUMENT TYPE EX-31.2 DESCRIPTION EXHIBIT 31.2 FILENAME a2176383zex-31_2.htm TEXT QuickLinks -- Click here to rapidly navigate through this document Exhibit 31.2 Certifications I, Gregory A. Lohnes, certify that: 1. I have reviewed this annual report on Form 40-F of TransCanada PipeLines Limited; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15 (f)) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated February 28, 2007 /s/ GREGORY A. LOHNES Gregory A. Lohnes Executive Vice-President and Chief Financial Officer QuickLinks Exhibit 31.2 /TEXT /DOCUMENT DOCUMENT TYPE EX-32.1 DESCRIPTION EXHIBIT 32.1 FILENAME a2176383zex-32_1.htm TEXT QuickLinks -- Click here to rapidly navigate through this document Exhibit 32.1 TRANSCANADA PIPELINES LIMITED 450 - 1st Street S.W. Calgary, Alberta, Canada T2P 5H1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER UNDER SECTION 906 OF SARBANES-OXLEY ACT OF 2002 I, Harold N. Kvisle, the Chief Executive Officer of TransCanada PipeLines Limited (the "Company"), in compliance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify, in connection with the Company's Annual Report as filed on Form 40-F for the fiscal year ending December 31, 2006 with the Securities and Exchange Commission (the "Report"), that: 1. The Report fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ HAROLD N. KVISLE Harold N. Kvisle Chief Executive Officer February 28, 2007 QuickLinks Exhibit 32.1 /TEXT /DOCUMENT DOCUMENT TYPE EX-32.2 DESCRIPTION EXHIBIT 32.2 FILENAME a2176383zex-32_2.htm TEXT QuickLinks -- Click here to rapidly navigate through this document Exhibit 32.2 TRANSCANADA PIPELINES LIMITED 450 - 1st Street S.W. Calgary, Alberta, Canada T2P 5H1 CERTIFICATION OF CHIEF FINANCIAL OFFICER UNDER SECTION 906 OF SARBANES-OXLEY ACT 0F 2002 I, Gregory A. Lohnes, the Chief Financial Officer of TransCanada PipeLines Limited (the "Company"), in compliance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify, in connection with the Company's Annual Report as filed on Form 40-F for the fiscal year ending December 31, 2006 with the Securities and Exchange Commission (the "Report"), that: 1. The Report fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ GREGORY A. LOHNES Gregory A. Lohnes Chief Financial Officer February 27, 2007 QuickLinks Exhibit 32.2 /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g688292.jpg FILENAME g688292.jpg TEXT GRAPHIC File /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g262674.jpg FILENAME g262674.jpg TEXT GRAPHIC File /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g253374.jpg FILENAME g253374.jpg TEXT GRAPHIC File /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g150531.jpg FILENAME g150531.jpg TEXT GRAPHIC File /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g465925.jpg FILENAME g465925.jpg TEXT GRAPHIC File /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g531525.jpg FILENAME g531525.jpg TEXT GRAPHIC File /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g1013369.jpg FILENAME g1013369.jpg TEXT GRAPHIC File /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g98620.jpg FILENAME g98620.jpg TEXT GRAPHIC File /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g39651.jpg FILENAME g39651.jpg TEXT GRAPHIC File /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g652090.jpg FILENAME g652090.jpg TEXT GRAPHIC File /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g993188.jpg FILENAME g993188.jpg TEXT GRAPHIC File /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g738810.jpg FILENAME g738810.jpg TEXT GRAPHIC File /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g539738.jpg FILENAME g539738.jpg TEXT GRAPHIC File /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g867826.jpg FILENAME g867826.jpg TEXT GRAPHIC File /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g515198.jpg FILENAME g515198.jpg TEXT GRAPHIC File /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g398903.jpg FILENAME g398903.jpg TEXT GRAPHIC File /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g763492.jpg FILENAME g763492.jpg TEXT GRAPHIC File /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g726177.jpg FILENAME g726177.jpg TEXT GRAPHIC File /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g234037.jpg FILENAME g234037.jpg TEXT GRAPHIC File /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g427317.jpg FILENAME g427317.jpg TEXT GRAPHIC File /TEXT /DOCUMENT DOCUMENT TYPE GRAPHIC DESCRIPTION g918433.jpg FILENAME g918433.jpg TEXT GRAPHIC File /TEXT /DOCUMENT /SUBMISSION This information is provided by RNS The company news service from the London Stock Exchange END FR GGGGFGMZGNZG
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