With deliveries edging up on its mainline and Alberta pipeline systems, TransCanada PipeLines Ltd. reported 9% and 8% increases in net earnings respectively in fourth quarter and full 2002.

Net earnings (net income applicable to common shares from continuing operations) for 2002 were C$747 million or C$1.56 per share, compared to C$686 million or C$1.44 per share for 2001. Fourth quarter net earnings in 2002 were C$180 million or C$0.37 per share over net earnings of C$166 million or C$0.35 per share for the same period in 2001.

The company credited higher earnings from its North American pipeline transportation business and reduced corporate expenses, partially offset by lower earnings from the power segment. The prior year the power segment earnings reflected the significant market opportunities created by high market prices and power price volatility.

“Our focus in 2002 was on the diligent and disciplined implementation of the key strategies we established more than two years ago,” said Hal Kvisle, TransCanada’s CEO. “As a result, we’ve delivered another year of consistently strong financial performance with increases in our income and cash flow. We are particularly proud of the level and quality of our 2002 funds from operations, which increased by 13% relative to 2001.”

TransCanada’s board of directors raised the quarterly dividend on common shares from C$0.25 per share to C$0.27 per share for the first quarter 2003 payable on April 30 to shareholders of record at the close of business on March 31.

Funds generated from continuing operations for the fourth quarter 2002 were C$467 million, an increase of C$106 million compared to the same period last year. On a full-year basis, funds generated from continuing operations were C$1,827 million up 13% from C$1,624 million in 2001.

The company has chosen to expense stock options and the impact of this accounting change, which has been recorded in the fourth quarter 2002, was a C$2 million charge to net income in the three months and full year 2002.

The National Energy Board (NEB) approved interim 2003 tolls on TransCanada’s mainline in December 2002. The NEB will hold a public hearing, scheduled to begin on Feb. 24, 2003, to consider the pipeline’s application for approval of 2003 tolls. Also in December, the Alberta Energy and Utilities Board approved interim tolls on TransCanada’s Alberta System.

For the year ended December 31, 2002:

TransCanada’s combined North American pipelines business generated net earnings of C$162 million in 4Q and C$653 million for the full year 2002, compared to C$153 million and C$585 million respectively. Its three wholly owned Canadian systems — the mainline, Alberta and BC — added C$133 million (4Q) and C$527 million (full year) of the total. The company’s North American pipeline ventures, including its interests in Great Lakes, TC PipeLines, LP, Iroquois, Portland, Foothills, Trans Quebec and Maritimes & Northeast and its northern development, added in C$29 million (4Q) and C$126 million (full year).

The company’s power segment contributed net earnings of C$30 million (4Q) and C$146 million (full year) in 2002, down from C$35 million and C$168 million respectively in 2001.

TransCanada’s financial position continued to improve during 2002 as it repaid debt maturities of C$486 million, reduced notes payable by C$46 million and increased shareholders’ equity by C$320 million. Its liquidity position remains strong as it continues to generate substantial operating cash flow and, aside from ongoing maintenance requirements and the pending Bruce Power transaction, has limited capital commitments going forward.

During the fourth quarter, TransCanada established a new C$1.5 billion syndicated credit facility, replacing existing lines set to expire in mid-2003, and also filed universal shelf prospectuses with Canadian and U.S. securities regulators in the amounts of C$2 billion and US$1 billion respectively.

“Our balance sheet remains strong and, as demonstrated in the fourth quarter, we remain extremely well positioned to act on opportunities for growth in our core businesses of natural gas transmission and power generation,” Kvisle said. “We believe there will be significant opportunities to continue to grow our pipeline and power businesses over the next decade. However, we will not pursue growth for growth’s sake. We will continue to carefully evaluate all opportunities with a focus on the acquisition and construction of highly efficient assets that enhance shareholder value. We will continue to fund our businesses in a manner that is consistent with our ‘A’ credit rating.

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