DEVELOPING NORTH AMERICA’S ENERGY FUTURE 12 2012 Annual Report TransCanada Corporation 2012 Financial Highlights Net Income Attributable to Common Shares | $1.30 billion or $1.84 per share Comparable Earnings ­£® | $1.33 billion or $1.89 per share «>À>LiÊ >À}ÃÊLivÀiÊÌiÀiÃÌ]Ê/>ÝiÃ]Ê i«ÀiV>ÌÊ>`ÊÀÌâ>ÌÊ­£® | $4.2 billion Funds Generated from Operations ­£® | $3.3 billion >«Ì>Ê Ý«i`ÌÕÀiÃ]Ê µÕÌÞÊÛiÃÌiÌÃÊ>`ÊVµÕÃÌÃÊ NÊ $3.5 billion Ê- >ÀiÊ Û`i`ÃÊ iV>Ài`Ê NÊ $1.76 per share Net Income Attributable Comparable Earnings(1) Comparable EBITDA(1) Funds Generated from Capital Expenditures, Equity to Common Shares (millions of dollars) (millions of dollars) Operations(1) (millions of dollars) Investments and Acquisitions (millions of dollars) (millions of dollars) 2,000 2,000 5,000 5,000 8,000 4,544 4,245 1,526 1,559 1,600 1,600 4,000 3,686 4,000 6,400 1,357 3,451 1,299 1,330 3,284 1,233 3,161 4,973 1,200 1,200 3,000 3,000 4,800 3,146 3,461 800 800 2,000 2,000 3,200 400 400 1,000 1,000 1,600 0 0 0 0 0 2010 2011 2012 2010 2011 2012 2010 2011 2012 2010 2011 2012 2010 2011 2012 Net Income per Share Comparable Earnings Dividends Declared Common Shares Market Price – Close (1) – Basic (dollars) per Share (dollars) per Share (dollars) Outstanding – Average Toronto Stock Exchange (millions of shares) (dollars) 3 3 3 1,000 50 47.02 44.53 2.22 37.99 2.17 800 40 691 702 705 1.96 1.89 2 1.84 2 2 1.77 1.76 1.68 1.60 600 30 400 20 1 1 1 200 10 0 0 0 0 0 2010 2011 2012 2010 2011 2012 2010 2011 2012 2010 2011 2012 2010 2011 2012 (1) Non-GAAP measure that does not have any standardized meaning prescribed by generally accepted accounting principles (GAAP). For more information see Non-GAAP measures in the Management's Discussion and Analysis of the 2012 Annual Report. 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DEVELOPING NORTH AMERICA’S ENERGY FUTURE Enormous change is underway in North America’s energy landscape. Advanced technology is unlocking significant oil and natural gas reserves once thought to be inaccessible. Some communities are realizing the benefits of energy development while others are grappling with the challenges that may occur. Demand for energy resources is booming from overseas markets as North America moves toward greater energy security and independence. This shift presents considerable investment opportunity for a company like TransCanada. The International Energy Agency predicts North America will require $6 trillion in new energy infrastructure by 2035 as aging facilities need to be replaced and energy products need to be transported to new and existing markets. With over 60 years’ experience delivering energy safely and reliably across the continent every day, we are leading this transformation and have embarked on a decade of unprecedented growth. Since 2010, we have placed $13 billion of new projects into service, including our Keystone oil pipeline that transports more than 500,000 barrels per day (bbl/d) of Canadian crude oil to markets in the United States, the refurbishment of two reactors at Bruce Power, one of the world’s largest nuclear power facilities, wind power developments in Canada and the United States, natural gas-fired power facilities on both sides of the border and further growth in our North American natural gas pipeline infrastructure. This past year saw us make significant progress in pturingca new investment opportunities that included $16 billion in new projects. This brings our total of secured capital projects to $25 billion, $12 billion of which are in the advanced stages of development and expected on-line by 2015. This $25 billion capital program includes the significant expansion of our Keystone System, additional oil pipelines to service growing production in Alberta’s oil sands, two potential pipelines across northern British Columbia to connect the emerging liquefied natural gas export market, major expansions to Mexico’s natural gas pipeline system, and solar power facilities in Ontario along with a large, clean-burning, natural gas-fired power plant. 2012 Annual Report TransCanada Corporation TransCanada has secured $25 billion worth of projects scheduled for completion by the end of the decade – $12 billion of which are expected on-line by 2015. Delivering these capital projects on time and on budget will generate significant value for our shareholders. Getting there will require discipline and commitment as we build upon our strong foundation of existing assets, talented people and financial capacity. Unparalleled asset base We are focused on maximizing the value of our existing energy infrastructure assets. TransCanada owns or has interests in $48 billion of long-life assets – primarily pipelines and power generation facilities – in Canada, the United States and Mexico. We operate one of the largest natural gas transmission networks on the continent, a 68,500-kilometre (km) (42,500-mile) system that taps into virtually every major supply basin and transports approximately 20 per cent of North America’s daily natural gas needs. We are also one of the largest providers of natural gas storage and related services, with more than 400 billion cubic feet (Bcf) of capacity. Through our energy business, we own or have interests in 21 facilities that have the capacity to generate 11,800 megawatts (MW) of electricity, enough to power more than 12 million homes. Our Keystone Pipeline transports almost one- quarter of Canada’s crude oil exports to the United States, and has moved more than 350 million barrels safely and efficiently since it began operating in 2010. The best talent Our employees are the heart of our competitive advantage. We have approximately 4,900 dedicated employees across North America who are an important part of the communities where we operate in seven Canadian provinces, 31 U.S. and five Mexican states. Our path forward lies in these committed and motivated people living our company’s values of integrity, collaboration, responsibility and innovation. Our employees and contractors enable us to achieve our best-in-class records for injury rates, operational safety and environmental performance. Financial strength and flexibility We are well positioned to fund our ongoing capital program with growing cash flow from new assets placed into service, an ‘A’ grade credit rating and a strong balance sheet. Maintaining our financial capacity and flexibility is critical to ensure we can always access capital to meet our needs. Over the last decade, we’ve invested $38 billion in long-term assets that have led to significant and stable growth in earnings, cash flow and dividends and a total annualized return to shareholders of 13.3 per cent per year since 2000. Looking forward, cash flow generated from operations is expected to grow as $12 billion of new assets begin contributing by 2015, and a further $13 billion are expected to be completed by the end of the decade.