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TransCanada’s head office, TransCanada Tower in Calgary, Alta., Canada.

TransCanada’s head office, TransCanada Tower in Calgary, Alta., Canada.

Video: Russ Girling, TransCanada President and Chief Executive Officer, Year in Review.

TransCanada’s head office, TransCanada Tower in Calgary, Alta., Canada.

President's Message

Video: Russ Girling, TransCanada President and Chief Executive Officer, Year in Review.

Letter to Shareholders

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Energy – it is essential to our modern way of life. Whether it’s the refined oil used to move our vehicles and make the endless consumer products we use every day, the natural gas that heats our homes and fuels our industry, or the electricity that lights our cities and powers our telecommunications, the world’s appetite for affordable energy supplies continues to grow. At the same time, efforts to improve energy efficiency and reduce environmental impacts are presenting new opportunities and challenges for companies like TransCanada that are dedicated to delivering the energy the world needs, safely and reliably.

A Solid Foundation

"It's clear our strategy is working because it has produced results for our shareholders in the form of an average total annual return of 15 per cent since 2000."

- Russ Girling, President and CEO

A Solid Foundation

Building on more than 60 years of experience, TransCanada is playing a central role in developing North America’s energy future, as new technology has unlocked oil and gas supplies that are paving the way toward energy self-sufficiency and the ability to export our energy products to meet the needs of overseas markets. Our diverse asset base of natural gas and liquids pipelines, gas storage and power generation facilities provides a solid foundation to realize our vision of becoming North America’s leading energy infrastructure company.

2014 was a year of many accomplishments for TransCanada, as we resolved a number of outstanding issues facing our existing business over the last few years, successfully advanced several of our new pipeline and power generation projects and captured more high-quality growth opportunities across the continent. We have created a platform that is expected to transform our company by the end of this decade and drive significant value for shareholders.

"It's clear our strategy is working because it has produced results for our shareholders in the form of an average total annual return of 15 per cent since 2000."

- Russ Girling, President and CEO

Positioned for Growth

Positioned for Growth

While 2015 may be challenging for North America’s energy industry as enterprises throughout the value chain adjust to lower oil and gas prices, TransCanada is well positioned for this environment thanks to our prudent approach and long-term perspective. This includes ensuring all our assets meet fundamental energy needs that transcend short-term price volatility, along with the additional stability of securing the majority of our existing assets and growth projects under long-term contracts with strong investment-grade counterparties or regulated business models.

Our $46-billion capital program is largely comprised of a diversified mix of natural gas and liquids pipeline projects across Canada, the United States and Mexico backed by either long-term, take-or-pay contracts that average 20 years or more, or a traditional cost-of-service model. This stability buffers an energy infrastructure company like TransCanada from the current volatility of world oil prices, providing predictability and stability for our investors, customers and shareholders.

Even more important is ensuring our existing $59-billion asset base operates safely and reliably, allowing it to deliver the energy people need and value for our shareholders for decades. Layer in a focus of continuing to capture future growth opportunities while maintaining the company’s financial strength and flexibility, and you have a strong sense of our overall plan.

Delivering Results

"TransCanada's board and executive leadership team are firmly committed to delivering long-term value to investors through significant and sustainable growth in future cash flow, earnings and dividends."

- Barry Jackson, Chair of the Board

Delivering Results

The Board of Directors and TransCanada’s executive leadership team firmly believe that our strategy is working and it best positions the company to deliver long-term value to investors by generating significant, sustainable growth in earnings, cash flow and dividends. The results bear that out: Since 2000, our shareholders have realized an average annual total return of 15 per cent including an annual dividend that has increased every year, from $0.80 to $1.92 in 2014. Over the last 15 years, we have grown our asset base from $26 billion to $59 billion and have developed an enviable footprint in Canada, the United States and Mexico. At the same time, we have maintained or improved our top-quartile standings when it comes to the safety and reliability of our assets.

Our base business performed well in 2014 supplemented by new assets that came online and began contributing increased earnings and cash flow. Comparable earnings were $2.42 per share, an eight per cent increase over last year. Funds generated from operations were $4.3 billion, a seven per cent increase from 2013. Earnings and cash flow from our existing asset base, coupled with the $12 billion in short to medium-term growth projects we have underway, provide the confidence in predictable earnings and cash flow growth that supported the board’s decision to increase the quarterly dividend by eight per cent for the first quarter of 2015 to $0.52, which is equivalent to $2.08 on an annual basis.

"TransCanada's board and executive leadership team are firmly committed to delivering long-term value to investors through significant and sustainable growth in future cash flow, earnings and dividends."

- Barry Jackson, Chair of the Board

Maximizing Our Assets

Maximizing Our Assets

Our top priority continues to be an unwavering focus on maximizing the value of our $59 billion in assets, ensuring they operate safely, efficiently and are being used to their full potential. We moved forward by successfully repositioning some of our key long-haul natural gas pipeline systems that have been under pressure from changing market dynamics in recent years. The longevity of the ANR Pipeline in the United States was secured through long-term commitments that fully contract its Southeast Main Line to move natural gas from the Marcellus and Utica regions to key market destinations for an average term of 23 years.

The restructuring of the Canadian Mainline’s tolling and service model has resulted in a significant increase in long-term contracts on the system and allowed us to collect our revenue requirement and incentive earnings for the system over the past two years. In November, the National Energy Board (NEB) approved the settlement reached with our largest Mainline shippers – local natural gas distribution companies in Ontario and Québec – that sets the stage for long-term stability and new expansions on the eastern end of the system.

Over the course of the year, we placed $3.8 billion of new assets into service. In January, the Gulf Coast extension of the Keystone Pipeline System began commercial service, delivering crude oil from the market hub at Cushing, Oklahoma to refineries in Port Arthur, Texas. That was followed by $300 million of expansions on our NGTL System beginning operation and the completion of the US$600-million Tamazunchale Extension project in Mexico. We also took possession of another four solar generation facilities in Ontario as they began producing emission-free electricity under 20-year contracts with the Independent Electricity System Operator (IESO), bringing our total solar capacity to 76 MW, enough to power more than 12,000 homes.

To support the funding of our capital program, we progressed our plans to sell our remaining U.S. natural gas pipelines to our master limited partnership, TC PipeLines, LP. In October, we sold our remaining 30 per cent interest in the Bison Pipeline and in November announced our intention to drop down our remaining 30 per cent interest in the GTN Pipeline. We believe our master limited partnership has the capacity to complete more than US$1 billion per year in asset purchases, and we are committed to vending in our remaining U.S. natural gas pipeline assets over the next several years in order to help fund our ambitious capital growth plan.

Advancing New Projects

Advancing New Projects

Notable progress was made in 2014 on our portfolio of commercially secured growth projects, which now totals $46 billion including $12 billion in small to medium-sized projects that are expected to drive earnings and cash flow growth as they come on stream through 2017. Our business development teams captured approximately $7 billion in new pipeline opportunities throughout the year, while our project management groups advanced several key projects through the permitting phases and into construction.

Our $34-billion portfolio of large-scale projects moved forward with important stakeholder engagement work and advancements in their respective regulatory processes. More than 18 months of field work and discussion with Aboriginal groups, landowners, communities and governments culminated in filing the application for the $12-billion Energy East Pipeline project with the NEB in October. In British Columbia, extensive environmental assessment and public consultation work resulted in both the Coastal GasLink and Prince Rupert Gas Transmission projects receiving environmental certifications.

Despite our best efforts to obtain a Presidential Permit, the Keystone XL Pipeline project moved into its seventh year of regulatory review in 2014. This delay has increased the cost of the project to approximately US$8 billion but TransCanada and our shippers remain firmly committed to building the pipeline and appreciate the support of the majority of Americans who also believe it is in the nation’s best interest.

The Right People

The Right People

Renewal and development of our people is critical to achieving our goals and is a continuing process. At the heart of TransCanada’s competitive advantage are our 6,000 employees and we owe our success to the fact that we have a highly talented and diverse workforce. The board and senior management are confident in our employees’ experience and expertise to deliver on our growth plans and commitment to being operationally excellent in everything they do. Our goal is to maintain the high quality of our work by instilling decades of valuable knowledge in our younger leaders and embedding our foundational values of Integrity, Responsibility, Collaboration and Innovation in all of our employees.

Change is also underway on our Board of Directors, where we have had six retirements since early 2012. Most recently, Thomas Stephens retired in the spring of 2014 after many years of service to shareholders. Siim Vanaselja joined last year, bringing extensive financial, governance, management and risk experience, and has proven to be an invaluable addition to the board. We are pleased to report that two of our more experienced directors, Paule Gauthier and Derek Burney, have agreed to stand for nomination for one more year in spite of having reached the usual retirement age. Their continued guidance and contributions in their areas of personal expertise have been critical as we move our $46-billion capital program forward.

We would like to take this opportunity to thank all our employees and shareholders for continuing to support TransCanada. 2014 was a year of major progress for us and we have very ambitious plans to continue to grow your company. We have the assets, opportunity and people to make those plans a reality. As we grow, we will continue to provide the safe, reliable energy that millions of families across North America rely on every day – and for many decades to come. We are committed to continuing to generate significant shareholder returns for those who have placed their confidence in our ability to deliver results.

Russ Girling signature.

Russ Girling
President and CEO

Barry Jackson signature.

Barry Jackson
Chair of the Board