STRENGTH & STABILITY

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Reconciliation of net (loss)/income to comparable earnings year ended December 31 (millions of $, except per share amounts) 2015 2014 2013 Net (loss)/income attributable to common shares (1,240) 1,743 1,712 Specific items (net of tax): Keystone XL impairment charge 2,891 — — TC Offshore loss on sale 86 — — Restructuring costs 74 — — Turbine equipment impairment charge 43 — — Alberta corporate income tax rate increase 34 — — Bruce Power merger – debt retirement charge 27 — — Non-controlling interests (TC PipeLines, LP – Great Lakes impairment) (199) — — Cancarb gain on sale — (99) — Niska contract termination — 32 — Gas Pacifico/ INNERGY gain on sale — (8) — NEB 2013 Decision – 2012 — — (84) Part VI.I income tax adjustment — — (25) Risk management activities 1 39 47 (19) Comparable earnings 1,755 1,715 1,584 Net (loss)/income per common share ($1.75) $2.46 $2.42 Specific items (net of tax): Keystone XL impairment charge 4.08 — — TC Offshore loss on sale 0.12 — — Restructuring costs 0.10 — — Turbine equipment impairment charge 0.06 — — Alberta corporate income tax rate increase 0.05 — — Bruce Power merger – debt retirement charge 0.04 — — Non-controlling interests (TC PipeLines, LP – Great Lakes impairment) (0.28) — — Cancarb gain on sale — (0.14) — Niska contract termination — 0.04 — Gas Pacifico/ INNERGY gain on sale — (0.01) — NEB 2013 Decision – 2012 — — (0.12) Part VI.I income tax adjustment — — (0.04) Risk management activities 0.06 0.07 (0.02) Comparable earnings per common share $2.48 $2.42 $2.24 1 year ended December 31 (millions of $) 2015 2014 2013 Canadian Power (8) (11) (4) U.S. Power (30) (55) 50 Natural Gas Storage 1 13 (2) Foreign exchange (21) (21) (9) Income tax attributable to risk management activities 19 27 (16) Total (losses)/gains from risk management activities (39) (47) 19 22 TransCanada Management's discussion and analysis 2015
Comparable earnings Comparable earnings per share Comparable earnings in 2015 were $40 million higher than in 2014, an increase of $0.06 per common share. The increase in comparable earnings was primarily the net result of: • higher earnings from Liquids Pipelines due to higher volumes on the Keystone Pipeline System • lower earnings from Western Power as a result of lower realized power prices and lower PPA volumes • higher interest expense as a result of long term debt issuances net of maturities • higher interest income and other as a result of increased AFUDC related to our rate-regulated pipeline projects including Energy East Pipeline and our Mexico pipelines • higher earnings from U.S. Power due to increased margins and sales volumes to wholesale, commercial and industrial customers, partially offset by lower capacity revenue in New York and lower realized prices at our northeastern U.S. Power facilities • higher earnings from U.S. Natural Gas Pipelines due to higher ANR, Great Lakes and GTN transportation revenues • higher earnings from Eastern Power primarily due to four solar facilities acquired in 2014 • higher earnings from the Tamazunchale Extension which was placed in service in 2014. The stronger U.S. dollar in 2015 compared to 2014 positively impacted the translated results in our U.S. businesses, however, this impact was partially offset by a corresponding increase in interest expense on U.S. dollar-denominated debt as well as realized losses on foreign exchange hedges used to manage our exposure. Comparable earnings in 2014 were $131 million higher than 2013, an increase of $0.18 per common share. The increase in comparable earnings was primarily the net result of: • incremental earnings from the Gulf Coast extension of the Keystone Pipeline System which was placed in service in January 2014 • higher interest expense from debt issuances and lower capitalized interest due to projects placed in service • lower earnings from Western Power as a result of lower realized power prices • higher earnings from the Tamazunchale Extension which was placed in service in 2014 • higher earnings from U.S. Natural Gas Pipelines due to higher transportation revenues at Great Lakes reflecting colder winter weather and increased demand, partially offset by lower contributions from GTN and Bison following the reductions in our effective ownership in July 2013 (GTN and Bison) and October 2014 (Bison) • higher earnings from U.S. Power mainly because of higher realized capacity prices in New York and higher realized power prices at our New York and New England facilities • higher earnings from the Canadian Mainline due to higher incentive earnings • incremental earnings from Eastern Power primarily due to solar facilities acquired in 2013 and 2014. TransCanada Management's discussion and analysis 2015 23
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 and 12: Risks and uncertainties • our abi
Page 13 and 14: Comparable measures We calculate th
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: • a $34 million adjustment to inc
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
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withdrawal season. By matching purc
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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
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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
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Balance sheet presentation of deriv
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Reporting discontinued operations I
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year ended December 31 (millions of
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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
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Management's report on Internal Con
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Report of Independent Registered Pu
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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
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20. PREFERRED SHARES at December 31
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The changes in AOCI by component ar
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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
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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
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Our annual report is online, visit
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STRENGTH & STABILITY

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