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LNG Pipeline Projects Prince Rupert Gas Transmission In June 2015, PNW LNG announced a positive FID for its proposed liquefaction and export facility, subject to two conditions. The first condition, approval by the Legislative Assembly of B.C. of a Project Development Agreement between PNW LNG and the Province of B.C., was satisfied in July 2015. The second condition is a positive regulatory decision on PNW LNG’s environmental assessment by the Government of Canada, which has not yet been received. In third quarter 2015, we received all remaining permits from the B.C. Oil and Gas Commission (BC OGC) which completes the eleven permits required to build and operate PRGT. Environmental permits for the project were received in November 2014 from the B.C. Environmental Assessment Office (BC EAO). With these permits, PRGT has all of the primary regulatory permits required for the project. We remain on target to begin construction following confirmation of a FID by PNW LNG. The in-service date for PRGT is estimated to be 2020 but will be aligned with PNW LNG’s liquefaction facility timeline. We are continuing our engagement with Aboriginal groups and have now signed project agreements with ten First Nation groups along the pipeline route. Project agreements outline financial and other benefits and commitments that will be provided to each First Nation for as long as the project is in service. PRGT is a 900 km (559 mile) natural gas pipeline that will deliver gas from the Montney producing region at an expected interconnect on the NGTL System near Fort St. John, B.C. to PNW LNG's proposed LNG facility near Prince Rupert, B.C. Should the project not proceed, our project costs (including carrying charges) are fully recoverable. Coastal GasLink We are continuing our engagement with Aboriginal groups along our pipeline route and have now announced long-term project agreements with eleven First Nations. These project agreements outline financial and other benefits and commitments that will be provided to each First Nation for as long as the pipeline remains in service. We also continue to engage with stakeholders along the pipeline route and are progressing detailed engineering and construction planning work to refine the capital cost estimate. In response to feedback received, we have applied for a minor route amendment to the BC EAO in order to provide an option in the area of concern. It is anticipated that approval for this route amendment will be received in first quarter 2016. We have received eight of ten pipeline and facilities permits from the BC OGC and anticipate receiving the remaining two permits in first quarter 2016. With these permits, Coastal GasLink will hold all of the required primary regulatory permits for the project. Pending the receipt of regulatory approvals and a positive FID from the LNG Canada joint venture participants in 2016, we will begin construction. Our pipeline in-service date will be scheduled to coincide with the operational requirements of the LNG Canada facility to be built in Kitimat, B.C. Should the project not proceed, our project costs (including carrying charges) are fully recoverable. Coastal GasLink is a 670 km (416 mile) pipeline that will deliver natural gas from the Dawson Creek, BC area, to the LNG Canada's proposed gas liquefaction facility near Kitimat, BC. Alaska LNG Project On November 24, 2015, we sold our interest in the Alaska LNG project to the State of Alaska. The proceeds of US$65 million from this sale provide a full recovery of costs incurred to advance the project since January 1, 2014 including a carrying charge. With this sale, our involvement in developing a pipeline system for commercializing Alaska North Slope natural gas ceases. 44 TransCanada Management's discussion and analysis 2015
BUSINESS RISKS The following are risks specific to our natural gas pipelines business. See page 94 for information about general risks that affect the company as a whole, including other operational risks, health, safety and environment (HSE) risks and financial risks. WCSB supply for downstream connecting pipelines Many of our North American natural gas pipelines and transmission infrastructure assets depend largely on supply from the WCSB. We continue to monitor any changes in our customer’s gas production plans and how these changes may impact our existing assets and new project schedules. There is competition for this supply from several pipelines within the basin. An overall decrease in production and/or competing demand for supply could impact throughput on WCSB connected pipelines that, in turn, could impact overall revenues generated. The WCSB has considerable reserves, but the amount actually produced depends on many variables, including the price of natural gas, basin-on-basin competition, downstream pipeline tolls, demand within the basin and the overall value of the reserves, including liquids content. Market access We compete for market share with other natural gas pipelines. New supply basins being developed closer to markets we have historically served may reduce the throughput and/or distance of haul on our existing pipelines and impact revenue. The long-term competitiveness of our pipeline systems and the avoidance of bypass pipelines will depend on our ability to adapt to changing flow patterns by offering alternative transportation services at prices that are acceptable to the market. Competition for greenfield expansion We face competition from other pipeline companies seeking opportunities to invest in greenfield natural gas pipeline development opportunities. This competition could result in fewer projects being available that meet our investment hurdles or projects that proceed with lower overall financial returns. Demand for pipeline capacity Demand for pipeline capacity is ultimately the key driver that enables pipeline transportation services to be sold. Demand for pipeline capacity is created by supply and market competition, variations in economic activity, weather variability, natural gas pipeline and storage competition and pricing of alternative fuels. Renewal of expiring contracts and the opportunity to charge and collect a toll that the market accepts depends on the overall demand for transportation service. A change in the level of demand for our pipeline transportation services could impact revenues. Commodity Prices The cyclical supply and demand nature of commodities and related pricing can have a secondary impact on our business where our shippers may choose to accelerate or delay certain projects. This can impact the timing for the demand of transportation services and/or new gas pipeline infrastructure. As well, sustained low gas prices could impact our shippers' financial situation and their ability to meet their transportation service cost obligations. TransCanada Management's discussion and analysis 2015 45
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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
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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 and 24: • a $34 million adjustment to inc
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Page 29 and 30: OUTLOOK Earnings We anticipate our
Page 31 and 32: Natural Gas Pipelines Our natural g
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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
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Page 43 and 44: More competition Changes in supply
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Page 49 and 50: Liquids Pipelines Our existing liqu
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Page 57 and 58: Energy East Pipeline In April 2015,
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Page 67 and 68: UNDERSTANDING THE ENERGY BUSINESS O
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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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