A Balanced Approach

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A reduction in energy-intensive activities: Drive fewer miles per year ... io m ass. Co a l CCS. CSP. PV F a rm. FOSSIL.
Ontario Energy Network Meeting Energy Demand and Improving Environmental Performance: A Balanced Approach December 6, 2011 Hal Kvisle President and CEO (Retired) TransCanada Corporation

Forward-Looking Information This presentation may contain certain information that is forward-looking and is subject to important risks and uncertainties. The words "anticipate", "expect", "believe", "may", "should", "estimate", "project", "outlook", "forecast" or other similar words are used to identify such forward-looking information. Forward-looking statements in this presentation are intended to provide TransCanada security holders and potential investors with information regarding TransCanada and its subsidiaries, including management’s assessment of TransCanada’s and its subsidiaries’ future financial and operational plans and outlook. Forward-looking statements in this presentation may include, among others, statements regarding the anticipated business prospects, and financial performance of TransCanada and its subsidiaries, expectations or projections about the future, strategies and goals for growth and expansion, expected and future cash flows, costs, schedules (including anticipated construction and completion dates), operating and financial results, and expected impact of future commitments and contingent liabilities. All forward-looking statements reflect TransCanada's beliefs and assumptions based on information available at the time the statements were made. Actual results or events may differ from those predicted in these forward-looking statements. Factors that could cause actual results or events to differ materially from current expectations include, among others, the ability of TransCanada to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits, the operating performance of the TransCanada’s pipeline and energy assets, the availability and price of energy commodities, capacity payments, regulatory processes and decisions, outcomes of litigation and arbitration proceedings, changes in environmental and other laws and regulations, competitive factors in the pipeline and energy sectors, construction and completion of capital projects, labour, equipment and material costs, access to capital markets, interest and currency exchange rates, technological developments and economic conditions in North America. By its nature, forward-looking information is subject to various risks and uncertainties, which could cause TransCanada's actual results and experience to differ materially from the anticipated results or expectations expressed. Additional information on these and other factors is available in the reports filed by TransCanada with Canadian securities regulators and with the U.S. Securities and Exchange Commission (SEC). Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date it is expressed in this presentation or otherwise, and not to use future-oriented information or financial outlooks for anything other than their intended purpose. TransCanada undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.

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TransCanada One of North America’s Largest Natural Gas Pipeline Networks • 57,000 km (35,500 mi) wholly-owned • 11,500 km (7,000 mi) partially-owned • Average volume of 14 Bcf/d North America’s 3rd Largest Natural Gas Storage Operator • 380 Bcf of capacity Canada’s Largest Private Sector Power Generator • 19 power plants, 10,800 MW Premier North American Oil Pipeline System • 1.4 million Bbl/d ultimate capacity Enterprise Value ~ $53 billion 3

TransCanada’s Power Portfolio 10,800 MW’s of critical infrastructure…

Natural Gas 52%

Nuclear 23% Coal PPAs 15% Hydro Wind 5% 5%

Positioned to prosper in a carbon-constrained world

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Building a Stable Power Asset Base • $4.5 billion investment in projects entering service between 2010 and 2012 •

Halton Hills (683 MW)



Kibby (132 MW)



Coolidge (575 MW)



Bruce A Units 1 & 2 Restart (1,500 MW) (50% interest)



Cartier Phases IV & V (270 MW) (62% interest)

• Long-term contracts with stable, predictable earnings and cash flow •

Strong counterparties



No commodity price risk

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Cartier Wind – Phases IV and V • In-service December 2011 • Gros-Morne Phase I (101 MW) • Montagne Sèche (58 MW) • In-service December 2012 • Gros-Morne Phase II (111 MW) • $400 million investment • $300 million spent to date • 20-year PPA with Hydro Québec

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North America Requires Substantial Energy Infrastructure Development Cumulative Investment in Energy Supply Infrastructure by Region and Fuel 2010-2035 OECD Pacific

Power

Other E. Europe/Eurasia

Oil

Russia

Gas

Middle East

Coal

Other Asia

Biofuels

India Africa Latin America OECD Europe China North America 0

1

2

3

4

5

6

7

$ trillion SOURCE: International Energy Agency (IEA) World Energy Outlook 2010 7

Increasing International Competition for Crude Oil Reserves

Source: EIA, Annual Energy Outlook 2011 8

North American Refined Products Consumption

30

MMb/d

25 Mexico* Canada

20

US Other US LPG

15

US Jet Fuel US Distillate Fuel Oil

10

5

0 2010

US Motor Gasoline

2015

2020

2025

2030

Sources: EIA Annual Energy Outlook 2011 (Dec 2010) EIA International Energy Outlook 2011 (Sept 2011) – Canada Demand EIA International Energy Outlook 2010 (July 2010) – Mexico Demand

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Canadian Oil Production

5,000

Mb/d

4,500 Atlantic 4,000 3,500 Oil Sands In-Situ

3,000 2,500 2,000

Oil Sands Mining

1,500 1,000

Conventional Heavy

500 0 2005

Conv. Light and Medium Pentanes/Condensate 2010

2015

2020

2025

Source: CAPP “Crude Oil – Forecast, Markets & Pipelines” (June 2011) Growth (Expected) Case

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North American Gas Supply/Demand Balance Bcf/d

110 100 90 80 70 60 50 40 30 20 10 0

1990

History

Forecast

Eastern Canada

LNG

. conv n U BC

kies c o R U.S.

WCSB

U.S. Shale Gulf of Mexico + U.S. Other

Mexico

1995

Source: TransCanada TSO

2000

2005

2010

2015

2020

2025 11

North American Natural Gas Demand Bcf/d

110 100 90 80 70 60 50 40 30 20 10 0 1990

History Forecast

Total Demand Electric Generation

Industrial Commercial Residential Pipe/Plant Fuel

1995

Source: TransCanada TSO

2000

2005

2010

2015

2020

2025 12

North American Power Generation by Fuel Type TWh

7,000

5,000

Gas

• Power demand is expected to grow at an average of 1.3% per year between 2010 and 2025

4,000

Renewables Oil Hydro

• Increase is primarily due to growing population and GDP

Nuclear

• Growing demand is met through natural gas-fired generation and renewables

History

Forecast

6,000

3,000 2,000 1,000 0 2000

Coal 2005

2010

2015

2020

2025

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Ontario Power Generation by Fuel Type

250

TWh Solar, Geothermal, Other

200

Wind

150 Coal

Hydro

100 Gas 50

0 1990

Nuclear

1995

2000

2005

2010

2015

2020

2025

SOURCE: Adapted from IHS CERA North American Gas and Power Scenarios: Spring 2011, Statistics Canada

2030

2035

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Bruce Power L.P. •

Bruce A Units 1 and 2 set to restart in 2012



Bruce Power will have 8 operating units





Bruce A - 3,000 MW (48.8% interest)



Bruce B - 3,200 MW (31.6% interest)

Power sold to the Ontario Power Authority under a long-term contract

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Bruce Power Restart – Remaining Milestones 2011 Q3

Unit 2

Fuel Load Complete

2012 Q4

Q1

Sync to Grid

Q2

Q3

Commercial Operations

Unit 1 Fuel Load

Sync to Grid

Commercial Operations

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TransCanada’s share of capital investment expected to approximate $2.4 billion – $2.2 billion spent to date

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Virtually every restart program has been faster on second unit Units 1 & 2 will generate 1,500 MW of clean energy 16

Bruce Power Asset Management Program Program is Expected to Extend the Operating Life of Units 3-8 Number of Units

9 8 7 6

Unit 1 & 2 Restart

5

Units 3-8 Current Life Expectation

4 3 2

Units 3-8 Original Life Assumptions

1 0 2005

2010

2015

2020

Original Assumptions

Current Expectation*

Unit 1 & 2 Restart

Potential Future Refurbishment

100% of the Power Generation Sold Under Long-Term Contract * Pending ongoing work and regulatory approvals

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Bruce Restart Project - Now in Final Phase

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Improving Environmental Performance • Environmental impact is driven by North American consumption: •

More than 80% of motor fuel emissions are generated by the vehicle



About 15% are generated in the production and refining phases



In the end, all emissions are driven by end-use consumption

• Reduced emissions will require: •

A reduction in energy-intensive activities: Drive fewer miles per year •



Reduced energy intensity: Drive more fuel efficient vehicles •



Are consumers prepared to change their habits?

Equipment replacement takes time

Advances in electricity supply: •

Electricity can replace hydrocarbons



Clean electricity sources can replace dirty coal



But equipment replacement takes time 19

Canada’s GHG Emissions In Context

Source: CAPP, Achieving Balance, The Canadian Oil Sands Story, Insight Energy Conference, (February 2, 2010) 20

Greenhouse Gas Emissions From Canadian and U.S. Coalfired Power Plants and Oil Sands Operations, 2007

Source: CAPP, Canada’s Oil Sands in a North American Policy Context, North American Energy Summit, May 6, 2010

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Current Cost of Competing Generating Options in North America 400 FOSSIL

350

CLEAN OR RENEWABLE

300

Levelized Cost (2009 Dollars per MWh)

250 200 150 100 50

Source: IHS CERA, Spring 2011. Notes: Busbar costs. Does not include storage, PTC, or ITC; CSP = concentrating solar power. All options represent the levelized cost of building 1 MW and represent nonfirm cost of electricity.

PV Farm

CSP

Coal CCS

Biomass

Nuclear

Onshore Wind

Geothermal

CCGT

Existing CCGT

Existing Coal

0

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Regulatory Challenges • Permitting processes are not aligned to the national interest • Approval processes have become more political with the increasing engagement of organized and well-funded special interest groups and NGOs • Eminent domain rights are critical and under threat • Energy related catastrophic events have increased public fear • Social media has been a game-changer, allowing opposition to connect to and mobilize others in the community

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Nearly All Infrastructure Development Experiences Opposition 80% Oppose 70%

Support

60% 50% 40% 30% 20% 10% 0% Nuclear Power Plant

Oil Drilling

Power Transmission Line

Natural Gas Drilling

SOURCE: The Saint Consulting Group – “The Saint Index: United States, 2011”

Natural Gas Pipeline

Wind Farm

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Eminent Domain is Critical and Under Threat • Crucial for the advancement of infrastructure projects •

A legitimate tool that balances individual interests and the national interest, and particularly critical for linear projects such as pipelines and transmission lines

• Eminent Domain rights are regularly challenged or politicized • TransCanada has an excellent track record of limiting its use of the eminent domain process compared to industry • It must be a fair yet predictable and efficient process

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Activism is on the Rise • Politicians are being increasingly influenced by campaigns whose opposition is not based on science or facts • Activists are abusing the regulatory process •

They know that delay = denial

• Opposition to the Keystone XL pipeline has been driven by professional activists who oppose oil sands development, not the pipeline • A serious threat to infrastructure projects that are in the national interest

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The Economic Value of Energy SelfSufficiency • When North America imports a barrel of oil from overseas, we pay $100 for that barrel while only $10 flows back to North American service and equipment providers • When North America produces its own barrel of oil, at least $80 flows back to North American service and equipment providers: •

Field development costs of $20/bbl



Field operating costs of $20/bbl



Corporate costs of $10/bbl



Continental pipeline tariffs of $10/bbl



Taxes and royalties of $20/bbl

• Developing and producing our own oil generates incremental spending within North America of at least $70/bbl • On 1 MMb/d, direct spending exceeds $25 billion annually • With GDP multipliers, the GDP impact is about $100 billion annually • Alaska, the oil sands, the Bakken, and the Deepwater Gulf could generate more than 5 MMb/d of incremental long-term production 27

Are Increased Regulatory Requirements Adding Value? • The Keystone XL pipeline permitting research and analysis is among the most exhaustive in U.S. history. • The Base Keystone Presidential Permit took 23 months. The Keystone XL process is at 38 months and counting • At what point does the cost of incremental regulatory requirements exceed the benefits obtained?

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Summary and Conclusions • Technological advances in shale gas and unconventional oil will enable North America to meet more energy demand with domestic resources • Canadian oil sands are a large, reliable source of crude oil with vital economic and energy security benefits for North America • Vehicle replacement takes 10+ years • Power plant replacement takes 20+ years • Environmental reviews must be free of inappropriate political influence to effectively serve the public interest • Communities often favor green solutions, but cost and feasibility are frequently underestimated • Energy development benefits and concerns must be addressed in a transparent manner with the public, media, and environmental groups • Strong political and energy industry leadership is needed to address the issues, engage stakeholders, and restore credibility 29

Ontario Energy Network Meeting Energy Demand and Improving Environmental Performance: A Balanced Approach December 6, 2011 Hal Kvisle President and CEO (Retired) TransCanada Corporation