STRENGTH & STABILITY

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NON-GAAP MEASURES We use the following non-GAAP measures: • EBITDA • EBIT • funds generated from operations • distributable cash flow • distributable cash flow per common share • comparable earnings • comparable earnings per common share • comparable EBITDA • comparable EBIT • comparable distributable cash flow • comparable distributable cash flow per common share • comparable income from equity investments • comparable depreciation and amortization • comparable interest expense • comparable interest income and other • comparable income tax expense • comparable income attributable to non-controlling interests. These measures do not have any standardized meaning as prescribed by U.S. GAAP and therefore may not be similar to measures presented by other entities. EBITDA and EBIT We use EBITDA as an approximate measure of our pre-tax operating cash flow. It measures our earnings before deducting financial charges, income tax, depreciation and amortization, net income attributable to non-controlling interests and preferred share dividends, and includes income from equity investments. EBIT measures our earnings from ongoing operations and is a useful measure of our performance and an effective tool for evaluating trends in each segment as it is equivalent to our segmented earnings. Funds generated from operations Funds generated from operations includes net cash provided by operations before changes in operating working capital. We believe it is a useful measure of our consolidated operating cash flow because it does not include fluctuations from working capital balances, which do not necessarily reflect underlying operations in the same period, and is used to provide a consistent measure of the cash generating performance of our assets. See the Financial condition section for a reconciliation to net cash provided by operations. Distributable cash flow Distributable cash flow is defined as funds generated from operations plus distributions in excess of equity earnings less preferred share dividends, distributions to non-controlling interests and maintenance capital expenditures. Maintenance capital expenditures represent costs which are necessary to preserve the operating ability of our assets and investments. We believe it is a useful supplemental measure of performance that defines cash available to common shareholders before capital allocation. See the Financial condition section for a reconciliation to net cash provided by operations. 10 TransCanada Management's discussion and analysis 2015
Comparable measures We calculate the comparable measures by adjusting certain GAAP and non-GAAP measures for specific items we believe are significant but not reflective of our underlying operations in the period. These comparable measures are calculated on a consistent basis from period to period and are adjusted for specific items in each period, as applicable. Comparable measure comparable earnings comparable earnings per common share comparable EBITDA comparable EBIT comparable distributable cash flow comparable distributable cash flow per common share comparable income from equity investments comparable depreciation and amortization comparable interest expense comparable interest income and other comparable income tax expense comparable net income attributable to non-controlling interests Original measure net income attributable to common shares net income per common share EBITDA segmented earnings distributable cash flow distributable cash flow per common share income from equity investments depreciation and amortization interest expense interest income and other income tax expense net income attributable to non-controlling interests Our decision not to adjust for a specific item is subjective and made after careful consideration. Specific items may include: • certain fair value adjustments relating to risk management activities • income tax refunds and adjustments • gains or losses on sales of assets • legal, contractual and bankruptcy settlements • impact of regulatory or arbitration decisions relating to prior year earnings • restructuring costs • impairment of assets and investments. In calculating comparable earnings and other comparable measures we exclude the unrealized gains and losses from changes in the fair value of certain derivatives used to reduce our exposure to certain financial and commodity price risks. These derivatives provide effective economic hedges, but do not meet the criteria for hedge accounting. As a result, the changes in fair value are recorded in net income. As these unrealized changes in fair value do not accurately reflect the gains and losses that will be realized at settlement, we do not consider them part of our underlying operations. TransCanada Management's discussion and analysis 2015 11
Page 1 and 2: STRENGTH & STABILITY 2015 Annual Re
Page 3 and 4: WHAT WE STRIVE FOR OUR VISION To be
Page 5 and 6: A SOLID FOUNDATION DEAR FELLOW SHAR
Page 7 and 8: In December 2015, we entered into a
Page 9 and 10: Management's discussion and analysi
Page 11: Risks and uncertainties • our abi
Page 15 and 16: TransCanada Management's discussion
Page 17 and 18: as at February 5, 2016 Common share
Page 19 and 20: CAPITAL PROGRAM We are developing q
Page 21 and 22: 2015 FINANCIAL HIGHLIGHTS We use ce
Page 23 and 24: • a $34 million adjustment to inc
Page 25 and 26: Comparable earnings Comparable earn
Page 27 and 28: Funds used in investing activities
Page 29 and 30: OUTLOOK Earnings We anticipate our
Page 31 and 32: Natural Gas Pipelines Our natural g
Page 33 and 34: We are the operator of all of the f
Page 35 and 36: RESULTS The following is a reconcil
Page 37 and 38: 8 Pipelines. In November 2014, we s
Page 39 and 40: OUTLOOK Earnings Canadian Pipelines
Page 41 and 42: at risk for the difference in expec
Page 43 and 44: More competition Changes in supply
Page 45 and 46: The Eastern Mainline Project is con
Page 47 and 48: BUSINESS RISKS The following are ri
Page 49 and 50: Liquids Pipelines Our existing liqu
Page 51 and 52: We are the operator of all of the f
Page 53 and 54: Comparable depreciation and amortiz
Page 55 and 56: U.S. shale oil supply growth origin
Page 57 and 58: Energy East Pipeline In April 2015,
Page 59 and 60: Energy Our Energy business includes
Page 61 and 62: We are the operator of all of our E
Page 63 and 64:
RESULTS The following is a reconcil
Page 65 and 66:
OUTLOOK Earnings We expect 2016 ear
Page 67 and 68:
UNDERSTANDING THE ENERGY BUSINESS O
Page 69 and 70:
Western and Eastern Power results C
Page 71 and 72:
Average spot market power prices in
Page 73 and 74:
Bruce Power results Results reflect
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U.S. Power results Comparable EBITD
Page 77 and 78:
withdrawal season. By matching purc
Page 79 and 80:
U.S. Power capacity payments A sign
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OTHER INCOME STATEMENT ITEMS The fo
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Net income attributable to non-cont
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The decrease in equity in 2015 was
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Net cash used in investing activiti
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Junior subordinated notes issued (m
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In December 2014, Series 1 sharehol
Page 93 and 94:
Long-term debt At the end of 2015,
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GUARANTEES Bruce Power We and our p
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Risk and Description Impact Monitor
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Greenhouse gas emissions regulation
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Derivatives designated as a net inv
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CRITICAL ACCOUNTING ESTIMATES When
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We base these valuations on our pro
Page 107 and 108:
Balance sheet presentation of deriv
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Reporting discontinued operations I
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year ended December 31 (millions of
Page 113 and 114:
QUARTERLY RESULTS Selected quarterl
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FOURTH QUARTER 2015 HIGHLIGHTS Cons
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Comparable EBITDA and comparable EB
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Comparable EBITDA for Energy decrea
Page 121 and 122:
Management's report on Internal Con
Page 123 and 124:
Report of Independent Registered Pu
Page 125 and 126:
Consolidated statement of comprehen
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Consolidated balance sheet at Decem
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Notes to consolidated financial sta
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Cash and Cash Equivalents The Compa
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Canadian income taxes are not provi
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The recognition of gains and losses
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4. SEGMENTED INFORMATION year ended
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year ended December 31, 2013 (milli
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5. OTHER CURRENT ASSETS at December
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Liquids Pipelines Keystone Pipeline
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Summarized Financial Information of
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Other U.S. Natural Gas Pipelines GT
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Allowance for Funds Used During Con
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At December 31, 2015, the Company's
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The above deferred tax amounts have
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16. LONG-TERM DEBT 2015 2014 Outsta
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Long-Term Debt Retired The Company
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18. NON-CONTROLLING INTERESTS The C
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Stock Options Number of Options Wei
Page 163 and 164:
20. PREFERRED SHARES at December 31
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The changes in AOCI by component ar
Page 167 and 168:
The most recent actuarial valuation
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Pension plan assets are managed on
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The significant weighted average ac
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Commodity Price Risk The Company is
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Balance Sheet Presentation of Non-D
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The balance sheet classification of
Page 179 and 180:
2 3 Reported within Revenues on the
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The fair value of the Company's der
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$216 million. The Company's total i
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28. SUBSEQUENT EVENTS Portland Natu
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Five year financial highlights (mil
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Investor information STOCK EXCHANGE
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Shareholder assistance If you are a
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Corporate governance Please refer t
Page 195:
Our annual report is online, visit
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STRENGTH & STABILITY

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