Doing the Right Thing: It’S Who We Are

Doing the Right Thing: It’s who we are 2012 CORPORATE SOCIAL RESPONSIBILITY REPOrt Table of Contents About this report ..............................................................................................1 A word from Russ Girling ..................................................................................3 About our business ...........................................................................................5 Our people .....................................................................................................13 Safety & reliability ...........................................................................................17 Health & safety at work ..................................................................................23 Protecting our communities ............................................................................27 Doing the Right Thing: Energy Literacy Encouraging a better understanding of the critical Aboriginal & Native American peoples ............................................................31 role of energy in North American society is the goal of Houston Energy Day, held each year in Houston, Texas. TransCanada is the title sponsor of the city-wide Protecting the environment .............................................................................35 event that engages thousands of children and their parents in activities to learn more about the science, Community partnerships .................................................................................41 technology and engineering behind pipelines and other energy systems. Forward-Looking Information and Non-GAAP Measures This Corporate Social Responsibility Report includes certain forward looking information to help current and potential stakeholders understand management’s assessment of our future plans and financial outlook, and our future prospects overall. Statements that are forward-looking are based on certain assumptions and on what we know and expect today and generally include words like anticipate, expect, believe, may, will, should, estimate or other similar words. Forward-looking statements do not guarantee future performance. Actual events and results could be significantly different because of assumptions, risks or uncertainties related to our business or events that happen after the date of this report. Our forward-looking information is based on the following key assumptions; anticipated construction costs, schedules and completion dates, regulatory decisions and outcomes, inflation rates, commodity prices and capacity prices, timing of financings and hedging, forging exchange rates, interest rates, tax rates, planned and unplanned outages and the use of our pipeline and energy assets, integrity and reliability of our assets, access to capital markets, and acquisitions and divestitures. Our forward-looking information is subject to risks and uncertainties, including but not limited to: our ability to successfully implement our strategic initiatives and whether they will yield the expected benefits, the operating performance of our pipeline and energy assets, economic and competitive conditions in North America and globally, the availability and price of energy commodities, regulatory decisions and out comes, outcomes of legal proceedings, including arbitration, changes in the political environment, changes in environmental and other laws and regulations, construction and completion of capital projects, labour, equipment and material costs, access to capital markets, interest and foreign exchange rates, weather, cyber security and technological developments. You can read more about these risks and others in our most recent Quarterly Report to Shareholders and 2012 Annual Report filed with Canadian securities regulators and the U.S. Securities and Exchange Commission (SEC) and available at www.transcanada.com. You should not put undue reliance on forward-thinking information and should not use future-oriented information or financial outlooks for anything other than their intended purpose. We do not update our forward-looking statements due to new information or future events, unless required by law. This report contains reference to certain financial measures (non-GAAP measures) that do not have any standardized meaning as prescribed by U.S. generally accepted accounting principles (GAAP) and therefore may not be comparable to similar measures presented by other entities. These non-GAAP measures may include Comparable Earnings, Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), Comparable EBITDA, and Funds Generated from Operations. Reconciliations to the most closely related GAAP measures are included in our most recent Quarterly Report to the Shareholders filed with Canadian securities regulators and the SEC and available at www.transcanada.com. About this report TransCanada has been issuing a Corporate Social Responsibility (CSR) report since 2001. During this period, we have defined CSR as a “commitment to operating in an economically, socially and environmentally sustainable manner, while recognizing the interests of our stakeholders.” This drive to formalize our efforts and spell out our CSR accountability led to TransCanada’s Stakeholder Relations Framework (see page 43). The Framework describes social license as “the level of acceptance and approval continually granted to an organization’s operations or projects by the local community and other stakeholders.” Finally, and to add another level of clarity, we identified and listed our key stakeholder groups to ensure we are responding to their diverse voices. 2012 a bridging year We have made good progress in our CSR efforts over the past decade, which coincided with an intense period of rapid growth. This is why, responding to both internal and external calls for greater comprehensiveness, rigour and transparency, in 2012 we established a new TransCanada CSR office. This office is intended to spearhead efforts across the company in raising the bar on our performance and reporting. We appreciate that this will take time. In many respects, 2012 is therefore a bridging year. While CSR is a continuous journey without end, we expect to make the necessary improvements in the next three to five years, which will align our reporting with Global Reporting Initiative (GRI) guidelines. “Materiality” matters As a first step in our renewed CSR journey, in 2012 we convened a series of internal focus groups with people who interact with our stakeholders on a daily basis. This project was foundational: to build on our practitioners’ daily interactions with the widest range of stakeholders and thereby establish the issues that are “material” to our operations. In other words, those that are fundamental not only to who we are and what we do, but also to what we and our stakeholders care about. We have begun this more robust approach to assessing material issues and impacts, and will highlight them in future CSR reports. TransCanada 2012 Corporate Social Responsibility Report 1 TransCanada’s key stakeholders Educators Community Residents Customers Local Business Indigenous Peoples Media Non-Governmental Organizations (NGOs) s and der Em ol p h lo Human Health & Farmers/Ranchers e r y Wellness Providers a e e h s S Contractor & Regulators Service Providers Business S Activity s h e Government a e Joint Venture Partners r e y h lo o p ld m Local Municipal ers nd E Landowner Government a Associations Landowners (tenants, Emergency Responders occupants) Community Investment Industry Associations Partners TransCanada 2012 2 Corporate Social Responsibility Report A word from Russ Girling There has been so much passionate discussion in recent years about what TransCanada stands for — and indeed who we are — that maybe it is time to take a step back and reintroduce ourselves. I hope it is a step forward to a greater understanding of who we are, what we stand for and how we earn your trust. Exercising corporate social responsibility is important to TransCanada and becoming more so each day. We have performed at the top of our industry in some areas for years, such as in safety and reliability, environmental performance and community engagement. But saying we are diligent is not enough. We also need to prove it, and to bring the same level of performance across all areas of CSR. This is why, starting with this report and over the next several years, we will be stepping up how we track and communicate our corporate social responsibility. In CSR language, we are building towards greater transparency, rigour and performance. This will mean continued commitment and a different way of thinking from all of us. Everything starts with our values There is another reason, too, why CSR is important to TransCanada. Our values demand it; Integrity, Responsibility, Collaboration and Innovation are the four points of our compass. I usually summarize them as simply doing the right thing — right for our employees and communities, right for stakeholders wherever we operate. Doing the right thing is imperative to our business. As investors, regulators, Aboriginal communities, landowners and governments demand ever more sustainable solutions, our CSR performance directly affects our business performance. Indeed, companies with sustainable practices are succeeding and growing their business. And that is as it should be. Our goal is to be a highly-respected company, one that attracts community support, partners, investors and employees not just for what

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