TQM Pipeline is an energy transporter whose mission is to develop its pipeline system

across Québec and the Maritimes and to operate it in a safe, efficient and profitable manner.

To that end, the Company:

promotes the efficient use of natural gas;

seeks maximum quality by using the best operating and administrative techniques at minimal cost;

encourages continuous training of its

employees;

complies with all laws, regulations and bylaws, with the utmost respect for the

environment; and

contributes to society’s well-being and development and conducts itself like a good corporate citizen.

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Achiievements 2005 2 Mission

3 Table of Contents

4 Message from Management

6 Directors and Management

7 System

9 Highlights

10 Financial Review

13 Statistics

15 Operations

16 Safety

18 Outlook

19 Business Risks

20 Contractual Obligations

21 Related Party Transactions

22 Significant Accounting Estimate

23 Forward-Looking Information

24 Other Information

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previous in-line inspections and excavation results The Company filed its 2005 toll application, which have culminated in a revised sound pipeline integrity included a cost of service of $86,481,000, and plan that is responsive to the risks involved in the secured approval for it from the interested parties and operation of the Company’s pipeline facilities. There the National Energy Board (the "NEB" or “Board”). In were no ruptures or leaks along the Company's 2005, the rate of return on rate base decreased from pipeline during the year. 7.78% to 7.53%, reflecting the lower interest rate on debt, which dropped from 7.01% to 6.70%, and the With a balanced financial structure and sound decrease in the approved rate of return on equity from management, the Company maintained its credit 9.56% to 9.46%; the average rate base increased ratings, namely “A (low)” from Dominion Bond Rating from $463,584,000 to $471,777,000. In 2005, the Service and “BBB+” from Standard & Poor’s. Company achieved incentive earnings of approximately $970,000 which were shared equally TQM Pipeline continued its public awareness and with our customers according to the cost savings information program. The activities included intiative agreement. The Board also approved TQM informational visits to municipalities, fire departments, Pipeline’s application for interim tolls, beginning and landowners along the pipeline system. The January 1, 2006, at the same level as in 2005. purpose of the meetings was to increase awareness of the presence of the pipeline on their properties and In October, 2004, the Company paid to a contractor a remind them to contact TQM Pipeline before doing final settlement in the amount of $6,200,000 including any work near facilities. As well its efforts toward interest, in respect of the decision rendered by the public awareness, TQM Pipeline contributed to the arbitration court regarding cost overruns on the communities it belongs to through the payment of extension project to Portland Natural Gas $2,500,000 of municipal and school taxes to Québec Transmission System ("PNGTS"). An amount of municipalities crossed by the TQM Pipeline system. $32,283,000 relating to the resolution of this claim has been applied in 2005 to gas plant in service and was TQM Pipeline is presently working to build facilities submitted to and approved by the NEB for inclusion in required to serve TransCanada Energy Ltd.'s ("TCE") the Company's 2005 tolls. cogeneration plant in Bécancour which is expected to be in service for late 2006, and continues to be well TQM Pipeline delivered 4.7 billion cubic metres (167 positioned for expected growth resulting from the Bcf) in 2005, versus 4.5 billion cubic metres (158 Bcf) advent of liquefied natural gas (“LNG”) or through in 2004, an overall increase of approximately 5%. other requests for increased transportation service The Company’s deliveries in 2005 for the East within eastern . Hereford station – serving PNGTS – were up 30.7% offset by lower deliveries in Québec which were down by 5.9%.

A full integration of integrity management was undertaken in prior years. New computerized systems and a significant volume of data obtained from

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To conclude, I would like to take this opportunity to mark the retirement of Réjean Laforge, after 25 years of loyal service to TQM Pipeline. I speak for all Board members and employees in acknowledging Réjean's contribution in placing TQM Pipeline in a strong financial position – a prerequisite for TQM Pipeline to participate in the growth opportunity arising from the introduction of potential new gas supply sources in the East.

Bernard Otis Acting General Manager

Trans Québec & Maritimes Pipeline Inc.

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Patrick Cabana (2) James M. Baggs Diirecttors Corporate Controller Vice-President Field Operations Gaz Métro inc. TransCanada PipeLines Limited 1717, rue du Havre Montréal (Québec) H2K 2X3 450 – 1st Street S.W. Calgary (Alberta) T2P 5H1

Pierre Despars Craig R. Frew (2) Executive Vice-President Vice-President Finance and Business Development Gas Transmission East Gaz Métro inc. TransCanada PipeLines Limited 1717, rue du Havre 450 – 1st Street S.W. Montréal (Québec) H2K 2X3 Calgary (Alberta) T2P 5H1

(1) (1) Martin Imbleau Jim A. McPherson Vice-President Director Business Development Sales and Marketing Gas Transmission East Gaz Métro inc. TransCanada PipeLines Limited 1717, rue du Havre Montréal (Québec) H2K 2X3 450 – 1st Street S.W. Calgary (Alberta) T2P 5H1

(1) (2) (3) Réjean Laforge President Trans Québec & Maritimes Pipeline Inc. (1) Executive Committee

6300, avenue Auteuil (2) Audit Committee Brossard (Québec) J4Z 3P2 (3) Retired in February 2006

Management Martin Imbleau Amy W. Leong Chief Executive Officer Chief Financial Officer

Bernard Otis Jean-Marc Rousseau Acting General Manager Financial Manager

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Trans Québec & Maritimes Pipeline Inc. (the “Company” or Management’s Discussion and Analysis, “TQM Pipeline”) is mandatary of TQM Pipeline and Company, dated March 15, 2006, should be read in Limited Partnership (the “Partnership”). Gaz Métro Limited conjunction with the audited Financial Partnership (“Gaz Métro ”) and TransCanada PipeLines Limited Statements of Trans Québec & Maritimes (“TransCanada”) are the general partners, each with 49.995% Pipeline Inc. (As mandatary of TQM Pipeline participation in the Partnership, and 3118240 Canada Inc. is and Company, Limited Partnership) and the the limited partner with the remaining 0.01% participation. Gaz notes thereto for the year ended December Métro and TransCanada are also equal shareholders in the 31, 2005. Amounts are stated in Canadian Company, 3118240 Canada Inc. and TQM Finance Inc., which dollars. acts as a financial intermediary between the Company and the Partnership.

TQM Pipeline built and operates an underground gas transmission system. Although the system is almost invisible on the surface, it crosses more than 75 municipalities and about 40 watercourses, including the St. Lawrence River in two places, near Montréal and Québec City. The pipeline is 572 kilometres ("km") long, including 3.5 km in a sub-fluvial tunnel near Québec City, and has a diameter ranging from 114 millimetres ("mm") to 762 mm.

In addition to the underground system, TQM Pipeline’s facilities include two compressor stations and 29 delivery points in the following areas: Montréal, the Laurentians, the , Québec City, the Montérégie and the Eastern Townships. TQM Pipeline’s Head Office is in Brossard.

7 Lac Gazoduc Saint-Jean Jonquière Roberval Alma Chicoutimi TQM Chambord Desbiens La Baie

1 888 810-8800

Légende / legend

Réseau de Gazoduc TQM TQM Pipeline system Québec n Poste de mesurage de Gazoduc TQM TQM Pipeline meter station La Tuque Saint-Augustin-de-Desmaures n Lévis Saint-Romuald s Point de livraison de Gazoduc TQM

TQM Pipeline delivery point

Pénitencier de Donnacona s n Saint-Nicolas/Saint-Flaviens s Point de réception de Gazoduc TQM TQM Pipeline receipt point Donnacona s Station de compression de Gazoduc TQM Saint-Lambert-de-Lauzon TQM Pipeline Compressor Station Portneuf n Saint-Flavien Réseau de TransCanada PipeLines Deschambault n Sainte-Marie TransCanada PipeLines system Saint-Joseph- er iv Vallée-Jonction de-Beauce R Réseau de Gaz Métro ce Beauceville Gaz Métro system n re w Ville/City Sainte-Anne- La t. Saint-Georges de-la-Pérade S Saint-Georges s t / Grand-Mère en Saint-Narcisse Province Saint-Laur Saint-Maurice n e de / of uv Québec le F

Trois-Rivières n Bécancour Pointe-du-Lac n s Mont-Tremblant s n Sainte-Geneviève-de-Berthiers Lac Saint-Joachin-de-Courval Saint-Agathe-des-Monts n Saint-Pierre s Sainte-Adèle n Drummondville Terrebonne2 s Lanoraie Saint-Jérôme s n Terrebonne Lavaltrie n n Mascouche Mirabel(Saint-Janvier) s Okas Mirabel Lachenaie n n L'Assomption Saint-Hyacinthe Acton-Vale Repentigny Asbestos MAINE n Laval Windsor Boisbriand Waterloo s Granby Marbleton Montréal Waterloo East Angus Saint-Lazare n Sherbrooke Farnham Brossard Coaticook Saint-Mathieu Bromont Magog n Cowansville Sainte-Anne-de-Sabrevois East Hereford n

NEW NEW YORK VERMONT HAMPSHIRE Mars 2006 / March 2006

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Years ended December 31 2005 2004 2003 (dollar amounts in thousands)

Operating revenues (1) $87,538 $84,468 $87,789

Partners’ income (1) $14,628 $14,216 $15,206

Total assets (1) $485,370 $496,646 $513,648

Total long-term debt (1)(2) $332,000 $254,600 $350,800

Partners’ withdrawals (1) $17,302 $19,502 $21,302

Approved average rate base $471,777 $463,584 $484,507

Weighted rate of return on 7.53% 7.78% 7.89% approved rate base

Approved monthly tolls $7,207 $7,017 $7,276

Total natural gas deliveries 4.7 109m3 4.5 109m3 4.6 109m3

Peak day(3) 19.8 106m3 21.0 106m3 21.2 106m3

(1) Prepared in accordance with Canadian generally accepted accounting principles.

(2) The First Mortgage Bonds Series G in the amount of $85,000,000 matured in September 2005 and accordingly, this amount was presented in the financial statements in current liabilities, under Long-term debt due within one year in 2004.

(3) Historical peak day achieved on February 13, 2002 – 21.5 106 m3.

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Partners’ income in 2005 was $14,628,000, an increase of $412,000 from 2004. The primary factors causing this increase are lower interest expenses and a higher approved average rate base offset by a lower approved rate of return on equity in 2005 resulting in lower equity return. The positive impact on earnings resulting from operating cost savings achieved under the terms of the 1997 and Multi-Year Tolls Agreement was consistent between 2005 and 2004. This agreement between TQM Pipeline and the parties interested in its tolls and tariffs was initially signed on January 6, 1997 and was to expire on December 31, 2001. In 2001, the agreement was extended to cover the period of January 1, 2002 through December 31, 2006. Under this agreement, savings achieved on certain designated components of the Company’s operating costs against a benchmark amount are shared equally between the Company and its customers.

Liiquiidiitty Funds Generatted From Operattiions and Capiitall Operating activities generated $34,655,000 during 2005, an increase of $1,555,000 in relation to the previous year. This fluctuation can be explained mainly by a Resources decrease in deferred charges ($7,419,000). In 2004 deferred charges included deferred expenses related to a contractor’s claim which have been applied to gas plant in service in 2005. Partially offsetting this increase is the negative impact of increases in changes in working capital items ($6,642,000) due mainly to an increase in trade accounts receivable-partners and a decrease in interest payable offset by a variation in accounts payable and accrued liabilities. Investtiing Acttiiviittiies

Investing activities required $6,124,000 in 2005, an increase of $4,945,000 compared with the previous year, primarily resulting from costs incurred for the pre- work for the Lachenaie compressor station expansion project. Capital spending includes construction of new facilities, which are dependent on requests from customers for new services, as well as capital maintenance. Fiinanciing Acttiiviittiies and Capiittall Sttructture

Financing activities required $28,076,000 in 2005, a decrease of $4,108,000 mainly because of lower debt reduction in 2005 ($3,600,000), lower partners’ withdrawals ($2,200,000), offset by higher deferred charges related to financing activities ($1,692,000).

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TQM Pipeline's long-term debt including the portion due within one year decreased by $7,600,000 in 2005 compared with the balance at the end of 2004. The

$85,000,000 First Mortgage Bonds, Series G (the "Series G Bonds") matured in September 2005 and were replaced with the issuance of $75,000,000 Series J Bonds which mature in September 2010. On September 22, 2005, the Partnership and the company entered into a new five-year term bank financing agreement. A maximum $85,500,000 revolving term loan is authorized under this agreement. The proceeds of this financing were used to repay all outstanding amounts due under the bank financing agreement entered into April 1, 2003, repay $10,000,000 of the Series G Bonds maturing on September 22, 2005, and for other corporate purposes. An $80,000,000 2005 Demand Bond was issued by the Company and pledged

(hypothecated with delivery) in favour of the lenders. This bond ranks pari passu with all other bonds issued by the Company.

A balanced financial structure and sound management enabled the Company to maintain its credit ratings, namely “A (low)” from Dominion Bond Rating Service and “BBB+” from Standard & Poor’s. The Company’s ability to generate adequate amounts of cash in the short term and the long term when needed, and to maintain financial capacity and flexibility to provide for planned growth, remain strong. Capiittall Sttructture Amount As at As at Description Rate Date 2005-12-31 2004-12-31 ($000,000) ($000,000) % Issue Maturity

First Mortgage Bonds Series G - 85.0 8.51 1995-10-05 2005-09-22 Series H Bonds 100.0 100.0 6.50 1999-08-16 2009-08-24 Series I Bonds 100.0 100.0 7.053 2000-07-17 2010-09-22 Series J Bonds 75.0 - 3.906 2005-09-22 2010-09-22 Term loan 57.0 54.6 (1) 2005-09-22 2010-09-22 As at As at Total long term debt 332.0 339.6 Distribution 2005-12-31 2004-12-31

Equity 143.0 145.6 Bonds 57.9% 58.7% Total long term debt and equity 475.0 485.2 Equity 30.1% 30.0%

Term loan 12.0% 11.3% (1) Rate set in relation to prime rate 100.0% 100.0%

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Tolllls and Tariiffs 2005 Tollll Applliicattiion On December 8, 2004 TQM Pipeline filed an application for interim tolls for 2005, which were authorized by the Board in Order TGI-2- 2004 of December 24, 2004. On September 23, 2005, after discussions with the parties interested in its tolls and tariffs and with their agreement, the Company filed its toll application for the period from January 1 to December 31, 2005. In Order TG-05-2005 of October 5, 2005, the Board authorized the tolls as requested.

The main points are summarized as follows:

• the cost of service is $86,481,000; • the rate of return on equity approved by the Board decreased from 9.56% to 9.46%, calculated according to the pre-established formula; • the average rate base increased from $463,584,000 to $471,777,000; • the rate of return on rate base decreased from 7.78% to 7.53%, reflecting the lower interest on debt, which decreased from 7.01% to 6.70%, as well as the reduction in the rate of return on equity approved by the Board. 2006 Intteriim Tollll Applliicattiion

In Order TGI-04-2005 of December 21, 2005, the Board authorized a monthly interim toll of $7,206,750 for TQM Pipeline, beginning January 1, 2006, as requested by the Company on December 8, 2005, or the same amount as in 2005.

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The following statistics concerning TQM Pipeline provide information on the results of its transportation, delivery and storage operations for the years 2001 through 2005.

Transportatiion and

Sttorage Vollumes (1106m3)

2005 2004 2003 2002 2001 Transportation 2000 Transportation 17 5 0

15 0 0 Boisbriand 1,420 1,530 1,554 1,573 1,625

12 5 0 Other Québec 1,535 1,611 1,759 1,980 1,919

10 0 0 East Hereford 1,762 1,348 1,305 1,415 1,025 750 Total transported 4,717 4,489 4,618 4,968 4,569 500 2005 2004 2003 2002 2001 Storage Boisbriand East Hereford Injection 157 146 155 118 99 Other Québec Withdrawal 140 123 126 109 64

Forecastt Gas Delliivery 6 3 (110 m ) 2006 2007 2012 Boisbriand 1,444 1,448 1,639 3 000 Other Québec 1,755 2,542 2,889 2 500 East Hereford 1,336 1,362 1,470 2 000

1 5 0 0 Total 4,535 5,352 5,998 1 0 0 0 500 0 2006 2007 2012

Boisbriand East Hereford Other Québec

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Gas Vollumes Delliivered Delivery Points (103m3)

Oka 1,762 Boisbriand 1,420,293 Mirabel 5,631 Mirabel (Saint-Janvier) 21,653 Saint-Jérôme 88,568 L’Assomption 27,487 Lavaltrie 117 Joliette 53,434 Lanoraie 2,379 Berthierville 6,077 Terrebonne 2 4,073 Mascouche 4,426 Terrebonne 18,932 Louiseville 13,213 Yamachiche 3,364 Pointe-du-Lac 33,566 Trois-Rivières 224,054 Saint-Maurice 319,255 Sainte-Anne-de-la-Pérade 326 Deschambault 17,644 Portneuf 24,642 Donnacona 1,374 Pénitencier de Donnacona 639 Saint-Augustin-de-Desmaures 249,999 Saint-Nicolas 111,640 Saint-Flavien 123,247 Waterloo 173,324 Coaticook 3,880 East Hereford 1,761,773 TOTAL 4,716,772

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Lachenaiie Ellectriic As a result of a force majeure incident caused by the Transformer Oiill Samplliing transformer failure in 2004, monthly oil samples were collected from East Hereford’s transformer throughout the

year of 2005. The samples have shown a favourable trend throughout the year.

NEB Inspectiion TQM facilities were inspected by an NEB inspector in June of 2005. The inspections included a visit to the Lachenaie Compressor Station and the following meter stations, Boisbriand, Joliette, Berthierville, Trois-Rivières, Saint- Maurice, Deschambault, and Saint-Augustin-de-Desmaures.

Findings were minor, and ranged from fence damage to required painting. These issues were addressed by the July 30 deadline.

The East Hereford compressor station was also inspected in June. No Assurance of Voluntary Compliance or Human Resources and Skills Development Canada findings were reported.

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Inttegratted Publliic January 2005 marked the beginning of the integrated public Awareness awareness program, which targets high risk areas. Awareness will be emphasized to land owners and contractors in the following

municipalities: Ste-Thérèse, Blainville, Mascouche, Maskinongé, Granby, Repentigny, L’Assomption, Boisbriand and Mirabel. This initiative entails meetings with over 400 landowners and 100 contractors. The goal is to reduce unauthorized encroachments.

TQM Services also meets regularly with emergency services in the towns of Blainville and Mirabel to discuss emergency planning.

Management of System There were no ruptures or leaks along the Companys’ pipeline during 2005. The frequency of patrols has remained unchanged. Inttegriitty The Montréal to Trois-Rivières and Magog to Montréal segments are flown twice weekly. The Trois-Rivières to Québec City section is

flown weekly and the remainder of the pipeline system (laterals) is flown twice per year.

L’’Assomptiion Riiver During October, cracks were observed at the L’Assomption River Sllope Faiillure right-of-way parallel to the crest of the slope towards the river. Analyses determined the potential for a rapid slope failure and pipe failure. The pipeline was eventually shut down and excavated for further pipe analysis. No integrity issues with the pipe were discovered.

Land remediation work was performed in the month of November 2005. Further site follow-up will occur during the spring of 2006.

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Piipelliine Imperfectiion / In December, an Elastic Wave inspection showed a potentially Defectt serious crack at 5.5 km downstream of AV-1. Pressure was restricted to 90% of the 60 day high. The pipeline was repaired by

grinding the cracks and reinforcing the pipe. Service was not interrupted when the pipe was excavated and repaired.

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In November 2005, the NEB approved the expansion of the

Lachenaie compressor station. This expansion involves the addition of compression and aftercooling to the existing compressor station and is required to serve expanded gas markets (Gaz Métro and TCE Bécancour cogeneration plant) and to provide increased reliability for the TQM system. Detailed engineering is underway and construction is expected to commence in March 2006. The project is on schedule for a November 1, 2006 in-service date. The projected cost of the expansion is approximately $40,000,000, reflecting scope changes and increased market costs for Engineering, Procurement and Construction services.

In 2006, the Company expects to continue to prepare analysis of the facilities and corresponding capital dollars that would be required to expand its system to accommodate new supplies of natural gas. TQM continues to be well positioned for expected growth, resulting from the advent of LNG or through other requests for increased transportation service within eastern Canada.

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Priimary Riisk

The Company’s primary risk is due to the fact that it is regulated by the Board. The

Board plays a significant role in approving TQM Pipeline’s return on equity, capital structure, tolls and system expansions. Debt / Equity Portion

The Company is cognizant of the views and Equity shares the concerns of credit rating agencies 30% regarding the Canadian regulatory environment. Credit ratings and liquidity have risen to the forefront of investor Debt attention. In light of the developments in the 70% Canadian regulatory environment, there exists a view that current Canadian regulatory policy is eroding the credit worthiness of utilities and, over the long term, could make it increasingly difficult for Effecttiiveness of Diiscllosure Procedures and utilities to access capital on reasonable terms. Conttrolls

By virtue of a decision from the Board, the Having assessed the effectiveness of controls and procedures Company is authorized to charge a fixed over financial reporting used by TQM Pipeline, management monthly toll which includes the has concluded that these controls and procedures provide reimbursement of certain expenses and a reasonable assurance that the financial information contained return on equity based on a deemed capital in the consolidated financial statements, management's report structure of 70% for debt and 30% for equity. and annual information form for the fiscal year ended December 31, 2005 is relevant, reliable and accurate.

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Oblliigattiions and Commiittments At December 31, 2005, the Company’s contractual obligations were as follows : Contractual Obligations 2006 2007 2008 2009 2010 2011+ (thousands of dollars) Principal payments on - - - 100,000 232,000 - Long Term Debt Interests payments on 19,670 19,632 19,585 17,304 9,584 - Long Term Debt

Operating leases 54 48 16 1 - -

Purchase Obligations(1) 15,940 7,900 - - - -

(1) Under a services agreement between the Company and TQM Services, effective January 1, 2003 and until December 31, 2007, many of the Company’s operating functions are performed by TQM Services. The amount for 2007 will be based on the 2006 amount ($7,900,000) adjusted for inflation. The remaining purchase obligations in 2006 ($8,040,000) are amounts owing to third party suppliers for the purchase of services and equipment related to the Lachenaie compressor station expansion.

Guaranttees The Company had no outstanding guarantees related to the long-term debt of unrelated third parties at December 31, 2005.

Conttiingenciies In September 1996, the Company instituted a Court action before the Superior Court against the contractor responsible for the tunnel portion of a sub-river

extension of its pipeline, near Québec City, claiming approximately $1,690,000 as damages resulting from the delays caused by the contractor. In response to this action, the contractor claimed from the Company approximately $8,500,000 principally for cost overruns, which was subsequently reduced to $4,600,000. The Company believes that it has a valid claim against the contractor and that the claim of the contractor against it is unfounded.

Any amounts relating to the resolution of these claims would be applied to gas plant in service and submitted to the NEB for inclusion in the Company’s tolls.

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Cost of service revenues totalling $86,481,000 in Effective January 1, 2003, pursuant to a service 2005 ($84,198,000 in 2004) have been recorded for agreement, many of the Company’s operating gas transportation services rendered to TransCanada. functions are provided by TQM Services, which is owned equally by TransCanada and Gaz Métro . Cost of service revenues During 2005, TQM Services charged the Company a fixed fee of $7,700,000 for operating services 88,000,000 ($7,500,000 in 2004). In addition, TQM Services 86,000,000 charged the Company $6,498,000 for capital services 84,000,000 and $1,442,000 for additional operating services 82,000,000 ($1,231,000 and $8,000 in 2004, respectively). In 2003 2004 2005 accordance with the terms of the agreement between the Company and TQM Services, the amounts for capital and additional operating services were paid to Revenues relating to Storage gas transportation and TransCanada. Storage and transportation totalling $298,000 in 2005 ($257,000 in 2004) have been recorded for services Fixed Fees rendered to Gaz Métro.

8,000,000 7,700,000 Storage Gas Transportation 7,500,000 7,500,000 7,300,000

7,000,000 2005 6,500,000 298,000 2003 2004 2005 2004 257,000

2003 268,000 All transactions have been measured at the exchange 220,000 240,000 260,000 280,000 300,000 amount.

Municipal and other taxes include amounts of

$1,863,000 in 2005 ($1,918,000 in 2004) charged by the partners in respect of capital taxes.

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Since a determination of many assets, liabilities, revenues and expenses is dependent upon future events, the preparation of the Company’s financial statements requires the use of estimates and assumptions, which have been made using careful judgement. TQM Pipeline’s most significant critical accounting estimate is depreciation expense. The Company’s property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Depreciation expense for the year ended December 31, 2005 was $22,854,000. However, depreciation rates for TQM Pipeline are approved by the NEB and depreciation expense is recoverable as part of the cost of providing the services. A change in the estimation of the useful lives of the Company’s property, plant and equipment would therefore have no material impact on the Company’s net income but would directly impact the cash flows from operating activities.

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Certain information in this Management’s Discussion and Analysis is forward-looking and is subject to important risks and uncertainties. The results or events predicted in this information may differ from actual results or events. Factors which could cause actual results or events to differ materially from current expectations include, among other things, the ability of TQM Pipeline to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits, the availability and price of energy commodities, regulatory decisions, competitive factors in the pipeline industry sector, and the prevailing economic conditions in North America. For additional information on these and other factors, see the reports filed by the Company with Canadian securities regulators. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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Additional information relating to TQM Pipeline, including the Company’s Annual Information Form, is posted on SEDAR at www.sedar.com under Trans & Maritimes Pipeline Inc. Sellectted Quartterlly and Annuall Fiinanciiall Three months ended 2005 Datta (11) (thousands of dollars) Mar. 31 Jun.30 Sep.30 Dec.31 Total Operating Revenue 21,443 21,696 21,555 22,844 87,538

Partners’ Income 3,419 3,216 3,325 4,668 14,628 Partners’ Withdrawals 2,000 5,501 3,301 6,500 17,302

Three months ended 2004

(thousands of dollars) Mar. 31 Jun.30 Sep.30 Dec.31 Total

Operating Revenue 21,233 21,125 21,004 21,106 84,468 Partners’ Income 3,525 3,639 3,681 3,371 14,216 Partners’ Withdrawals 3,600 6,401 4,300 5,201 19,502

(1) The selected quarterly and annual financial data has been prepared in accordance with Canadian generally accepted accounting principles.

The Company’s annual revenues and partners’ income fluctuate over the long term based on decisions by the NEB and negotiated settlements with interested parties, which in turn are influenced by changes in the Company’s annual costs. These costs include operating, maintenance and administration costs, depreciation, taxes, and operating return, which comprises debt costs and the NEB approved return on equity associated with the Company’s approved rate base.

Generally, quarter over quarter revenues and earnings during any particular fiscal year remain fairly stable with fluctuations arising due to items outside of the normal course of operations. Partners’ withdrawals fluctuate on a quarter over quarter basis to maintain a 70/30 debt-equity ratio.

Partner’ income for the three months ended December 31, 2005 was $4,668,000, an increase of $1,297,000 from the same period in 2004. The primary factors causing this increase are lower financing charges as well as a higher approved average rate base partially offset by a lower approved rate of return on equity in 2005 resulting in lower equity return.

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