TransCanada's CEO Hosts Annual Special Shareholder Meeting (Transcript)

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TransCanada Corporation (NYSE:TRP)

Annual Special Shareholder Meeting

April 26, 2013 12:00 pm ET


S. Barry Jackson - Non Executive Chairman, Member of Governance Committee, Member of Human Resources Committee and Director of TransCanada PipeLines Limited

Christine R. Johnston - Vice President and Corporate Secretary

Russell K. Girling - Chief Executive Officer, President and Director

S. Barry Jackson

Well, good morning, everyone. It's just about 10:00 so I think we will get started with the meeting.

My name is Barry Jackson and I'm the Chair of TransCanada Corp. and on behalf of the Board of Directors and the Management of the company, I'd like to welcome everyone here today. We have a large number of shareholders with us and we're also honored to have a number of former directors with us today, and I thank you all for attending. This is a large group so I've got a couple of housekeeping matters to attend to.

Firstly, if you haven't already done so, please ensure that your cellphone is turned off. We also ask you that you refrain from taking photos and be advised that no recording devices may be used during the meeting. Secondly, we are conscious to safety and so, if there is an alarm during the meeting, please follow the instructions of the BMO staff that you will see at various places around the meeting hall this morning.

So I'll now proceed with the business of the meeting and start by introducing those here on the stage. On my immediate left is Russ Girling, President and Chief Executive Officer; and to his left is Christine Johnston, Vice President and Corporate Secretary. Other members of TransCanada's senior management group are present and I'll introduce them as well. If you'd please stand and remain standing until I've introduced the entire group, that would be great.

So Don Marchand, Executive Vice President and Chief Financial Officer; Alex Pourbaix, President of Energy and Oil Pipelines; Greg Lohnes, Executive Vice President of Operations and Major Projects; Karl Johannson, Executive Vice President of Natural Gas Pipelines; Wendy Hanrahan, Executive Vice President of Corporate Services; Dennis McConaghy, Executive Vice President of Corporate Development; Sean McMaster, Executive Vice President of Stakeholder Relations, General Counsel, and Chief Compliance Officer, and they will be available to answer questions later during the reception.

So with regard to the business of the meeting, please remember that only registered common shareholders or duly appointed proxy holders who have registered for this meeting are entitled to participate. The purpose of the meeting as outlined in the management information circular dated February 11, 2013, is for the common shareholders to receive the 2012 consolidated financial statements and auditors' report, to elect directors, to appoint auditors, to reconfirm and vote on proposed amendments to the stock option plan, to reconfirm and vote on proposed amendments to the shareholders rights plan, and to consider and approve on an advisory basis TransCanada's approach to executive compensation.

Now for ease of moving the meeting along, we've asked certain proxy holders to make any second motions. And at the conclusion of the formal meeting, Russ Girling will address the state of the campaign and its plans for the future and of course, there'll be a Q&A session following that.

So in accordance with bylaw #1 of the company, I now appoint Stephen Bandola and Robyn Hall, representatives of ComputerShare Trust Company of Canada, to act as scrutineers for the meeting. The preliminary report by the scrutineers indicates that a quorum is present for the meeting and I would ask the scrutineers to submit their final report on attendance when they're ready.

Christine Johnston, Vice President and Corporate Secretary, will report on the mailing on the notice of the meeting and advise us about the process the meeting will follow and any legal questions on the conduct of the meeting will be referred to Ms. Johnston. Christine?

Christine R. Johnston

Thank you, Barry. Mr. Chairman, the notice calling the annual special meeting, the management information circular and the form of proxy were mailed on March 13, 2013, to common shareholders of record on the securities register of the company at the close of business February 26, 2013, in accordance with applicable Canadian corporate and securities law.

An affidavit attesting to the mailing of the notice of meeting, management information circular and form of proxy is hereby placed before the meeting. Where required or requested in accordance of Canadian laws, the annual report containing the consolidated financial statement and auditors' report was also mailed to shareholders. And those documents have also been made available on review -- for review on the company's website.

I'd like to inform you that we will be conducting a vote by ballot for each item of business today, with the exception of the appointment of auditors.

As for process to be followed after the formal meeting today, shareholders and proxy holders in attendance have been provided with question cards. You may write your questions on the card, and then please sign and print your name legibly on the card to indicate whether you are a registered shareholder or proxy holder. Those listening by webcast may also ask questions electronically via the webcast.

Please indicate when you have your question card ready, we will collect the cards and questions received via the webcast before entering the question-and-answer session. All questions from people identifying themselves as registered shareholders or proxy holders will be answered individually or by grouping with other similar questions. If we do not have enough time to respond today, a written response will be sent at a later time if your name and address or email address are also included on the card.

We will also respond to questions from the floor at the appropriate time. If you wish to ask a question from the floor, please use one of the microphones set up in the aisles. Please identify yourself, confirm you're a registered shareholder or proxy holder. And you will be limited to one question with a duration of not more than 2 minutes. Should you have additional questions to ask, you'll be asked to step to the back of the line and wait another turn at the microphone.

Please note that the media and investment community will be given an opportunity to ask questions at conferences to be held later today. The question-and-answer session period is for registered shareholders and proxy holders only.

S. Barry Jackson

Thank you, Christine. So as notice of the meeting has been given and a quorum is present, I hereby declare that this meeting is duly called and constituted for the transaction of business.

So with regard to the first item of business, the annual report, including the consolidated financial statement and the auditors' report have been made available for review by shareholders in accordance with applicable Canadian corporate and securities law. Copies of the annual report are also available at the display booths set up just outside the meeting room, and representatives of KPMG will be available to answer questions during the general question period.

Next item of business is the election of directors who will hold office until the next annual meeting of shareholders or until their successors are earlier elected or appointed. I'll now introduce the current directors who are present today and standing for reelection, and I would ask that they please stand as I call their names. Kevin Benson, Derek Burney, Paule Gauthier, Russ Girling, Mary Pat Salomone, Tom Stephens, Mike Stewart, Richard Waugh, and myself, Barry Jackson. Also nominated is current Director Paula Reynolds, who was unable to attend this meeting and sends her regrets.

You'll also note that Paul Joskow and Linn Draper are not standing for reelection this year. Dr. Joskow retired on March 22 of this year, and Dr. Draper is retiring effective today. Linn is here with us today. And Linn, would you please stand? Linn was first appointed as a Director of TransCanada in 2005. And we thank Linn for his 8 years of service on the board and for his dedicated work on the Health, Safety & Environment Committee, the Human Resources Committee and previously, the Audit Committee. We truly valued his expertise and the exemplary leadership skills he brought as Chair of the Health, Safety & Environment Committee.

Unfortunately, Paul is unable to attend today, and he sends his regrets. Paul was first elected as a Director of TransCanada in 2004. We thank Paul for his 9 years of service on the board and for his wisdom on the Audit and Governance Committees. Over that period in time, he made invaluable contributions to the board through his knowledge of the U.S. regulatory framework and his perspective as an economist.

And at this point, I'd also like to recognize the contribution of John MacNaughton, who retired from the Board of Directors earlier this year due to ill health. I'm sorry to say that John passed away this past February. John was first appointed as a Director of TransCanada in 2006. And he served as a member of the Audit Committee, the Health, Safety & Environment Committee and served as Chair of the Governance Committee since 2009. John was a proud Canadian. He was a member of the Order of Canada, and he is remembered as a true gentleman and a mentor to board members with an uncompromising moral compass. John will be greatly missed.

Linn, Paul and John, on behalf of my fellow board members and the management, I thank you for the significant contributions that you all have made to the success of TransCanada. Thank you.

So to the nominations, TransCanada's articles state that the board must have a minimum of 10 and a maximum of 20 directors. Following the retirement of Dr. Joskow, the board determined that 10 directors will be elected in this meeting. The term of office of each of the current directors expires at the end of the meeting. The term of office proposed for each nominee is a term of 1 year expiring at TransCanada's 2014 Annual Meeting or until a successor is earlier elected or appointed. Now please be reminded that only registered shareholders present in person and proxy holders, those of you who are holding the blue voting cards are entitled to vote on the resolution. So can I have a motion to nominate the directors, please?

Unknown Attendee

Mr. Chairman, I nominate the following individuals to serve as Directors of the company to hold office until the next annual meeting of shareholders or until their successors are earlier elected or appointed: Kevin E. Benson, Derek H. Burney, Paule Gauthier, Russell K. Girling, S. Barry Jackson, Paula Rosput Reynolds, Mary Pat Salomone, W. Thomas Stephens, D. Michael G. Stewart and Richard E. Waugh.

S. Barry Jackson

Thank you. Are there any further nominees? Hearing none, I now declare the nominations closed. As indicated previously, the vote on the election of directors will be made by ballot, and Christine Johnston will give us instructions for the use of the ballot.

Christine R. Johnston

Registered shareholders present in person or proxy holders representing shareholders were given blue ballot, the blue piece of paper, when they registered for the meeting today. Any registered shareholder or proxy holder who did not receive a blue-colored ballot, please raise your blue voting cards, so that scrutineers can provide you with the ballot. Proxies held by management will be voted on the ballot as indicated in the proxies. You will note that the 10 names have been preprinted on the ballot. You vote for each candidate for election by placing an x in the For or Withhold box beside each name. You may only vote For or Withhold for the director nominees listed. You do not need to provide an indication for all director nominees. The nominees for whom you haven't voted will be voted for in accordance with management's recommendation. If you vote for a person who has not been nominated which would have required you to manually write in their name, the ballot will be spoiled and not counted. After completion, please sign the ballot with your usual signature and it will be collected by the scrutineers.

S. Barry Jackson

So I'll wait for a minute while the ballots are completed and collected.


Are there any more ballot forms to go? If there are, would you please hold your -- hold it up, and the -- it will be collected.


Looks like we've got them all. I declare that the balloting on this matter is closed, and direct the scrutineers to advise the Corporate Secretary when they've completed the counting of the ballots and are ready to report.

So we'll return to the meeting, the agenda. I'll accept the report of the scrutineers on this ballot at the end of the meeting.

The next item of business is appointment of auditors, and I'd appreciate a motion in connection with the resolution appointing the auditors.

Unknown Attendee

Mr. Chairman, I move the resolution of appointing KPMG LLP, chartered accountants, as auditors of the company until the next annual meeting of the shareholders and authorizing the Directors to fix their remuneration.

S. Barry Jackson

Thank you. Is there a seconder?

Unknown Attendee

Mr. Chairman, I second the motion.

S. Barry Jackson

Thank you. All those in favor, raise your hand.


Contrary, if any?


I declare the motion carried.

Next item of business is the consideration of an ordinary resolution to approve the increase in the total number of common shares reserved for issuance under the stock option plan and to reconfirm the stock option plan. The Board of Directors of the corporation approved an increase in the total number of common shares reserved for issuance under the option plan by 10 million and to reconfirm the plan, each of which are subject to shareholder approval. These items are described in the -- in detail in the February circular, which was mailed to shareholders with the materials of the meeting. The increase in the total number of common shares as reserved for issuance under the option plan must be approved and the stock option plan must be reconfirmed again by a simple majority of the votes cast at the meeting. If the approval and the reconfirmation is not received, no further grants of options will be possible under the plan. However, the plan -- the old plan would continue in the same terms it was the day before the meeting in respect of options previously granted.

So can I have a motion in connection with the resolution to approve and reconfirm the stock option plan?

Unknown Attendee

Mr. Chairman, I move the resolution to approve the increase in the number of common shares of the company reserved for issuance pursuant to the exercise of stock options under the company's stock option plan, by an additional 10 million common shares and to reconfirm in effect the stock -- the company's stock option plan as amended as described in the February 11, 2013, management information circular of TransCanada.

S. Barry Jackson

Thank you. Is there a seconder?

Unknown Attendee

Mr. Chairman, I second the motion.

S. Barry Jackson

Thank you. As previously indicated, the vote on the amendment will be made by ballot. Registered shareholders and proxy holders have been provided with a yellow-colored ballot. If you have previously signed and returned your proxy, your votes have already been recorded and you do not need to vote by ballot. Any registered shareholder or proxy holder who did not receive a yellow-colored ballot, please raise your blue voting cards so the scrutineers can provide you with a ballot.

While that's occurring, and as you get the ballots, please mark on the ballot by making an x in the box which indicates either For or Against, as the case may be. And as Christine have directed earlier, please sign and print your name on the lines provided. Scrutineers will then collect the ballots.


Any more ballots out there to be collected? You raise them and keep your hands up until they'll get picked up.


Looks like that's it. I declare the balloting on this matter closed and direct the scrutineers to advise the Corporate Secretary when they've completed the counting of ballots and are ready to report.

So to return to the agenda, again, the next item of business is the consideration of an ordinary resolution approving continuation of and the amendments to the shareholder rights plan, as amended.

The primary objective of the shareholder rights plan is to provide the Board of Directors with sufficient time to explore and develop alternatives for maximizing shareholder value for takeover bid as made for the company and to provide every shareholder with an equal opportunity to participate in such a bid.

The Board of Directors determined it would be appropriate to make minor amendments to our rights plan, including words in the preamble section, to clarify that the purpose of our plan is to better enable the Board of Directors, in the event of a takeover bid, to carry out their statutory duties to act in the best interest of the company.

A summary of the principal terms of the shareholder rights plan is specifically set out in the February 11 management information circular, which was mailed to all shareholders with the materials for the meeting. The continuation of and the amendments to the shareholder rights plan must be approved by a simple majority of the votes cast at this meeting in order to remain effective. If the resolution relating to the shareholder rights plan is not passed, the plan will terminate.

I'd appreciate a motion in connection with the resolution to continue and approve the rights plan.

Unknown Attendee

Mr. Chairman, I move the resolution to continue and approve the amended and restated shareholder rights plan as described in the February 11, 2013, management information circular of TransCanada.

S. Barry Jackson

Thank you. Is there a seconder?

Unknown Attendee

Mr. Chairman, I second the motion.

S. Barry Jackson

Thank you. Again, we're going to conduct this vote by ballot. So the registered shareholders and proxy holders have been provided with a green-colored ballot. If you've previously signed and returned your proxy you don't need to vote by the ballot here. So any registered shareholder or proxy holder who did not receive a green-colored ballot, please raise your blue voting cards so we can ensure that you have one. And again, mark the ballot with an x in the box, which indicates either For or Against, as the case may be, and sign in the appropriate places.


Any more ballots? Looks like we've got them. So I'll declare the balloting on this matter closed, and again, direct the scrutineers to advise when the Corporate Secretary -- advise the Corporate Secretary when they've completed the counting of the ballots.

Next item of business is the consideration and approval on an advisory basis of an ordinary resolution approving TransCanada's approach to executive compensation. In order to ensure an appropriate level of director accountability to the shareholders of the company for the executive compensation decisions, the Board of Directors is determined that a shareholder advisory vote on executive compensation, commonly known as a say on pay, would be beneficial. The board is asking shareholders to consider and if deemed advisable, to approve on an advisory basis a resolution accepting TransCanada's approach to executive compensation. The text of the resolution was specifically set out in the February 11 information circular. And as the vote will be on an advisory basis, the results are not binding on the board. However, the board will, very specifically, we take into account the results of the vote as they consider future compensation policies, procedures and decisions. The company will disclose the results of the shareholder advisory vote as part of the results of this meeting as well. I'd appreciate a motion in connection with the resolution of the company to accept the approach on executive compensation.

Unknown Attendee

Mr. Chairman, I move the resolution to accept on an advisory basis the company's approach to executive compensation as described in the February 11, 2013, management information circular of TransCanada.

S. Barry Jackson

Thank you. Is there a seconder?

Unknown Attendee

Mr. Chairman, I second the motion.

S. Barry Jackson

Again, we're going to do this vote by ballot. So registered shareholders in this case have been provided with a pink-colored ballot and again, the same direction with regard to proxies. If you've completed them, you don't need to vote by the ballot here. Anybody not received a pink-colored ballot, please raise your blue card and we'll get you one.


Any last ballots to go in?


Looks like they're all in. So I'll declare the balloting on this matter closed. And I'll direct, again, the scrutineers to advise the Corporate Secretary when they've completed the counting of the ballots and are ready to report.

We'll now just take a brief pause while we wait for the scrutineers to report on this ballot. And I'll request that you remain seated as -- expect their report will be available very quickly.

The Corporate Secretary has received the scrutineers' final report on attendance and the results of the votes taken by ballot. And I would now ask Christine to please provide the voting results to the meeting.

Christine R. Johnston

The scrutineers' report on attendance of the meeting has now been received. It shows that there are 51 holders of common shares present in person and entitled to vote in their own right or by proxy, in 51.6% of the issued shares of the company.

I also received reports of the scrutineers on the election of directors on the reconfirmation and approval of the stock option plan and the continuation and approval of amendments to the shareholder rights plan, and on the acceptance and approval of the company's approach to executive compensation.

The scrutineers' report indicates that all 10 nominees for directors have been elected, and that votes withheld in respect of the election of any single director were not greater than 4.3% of the votes cast. The resolution with respect to the reconfirmation and amendment to the stock option plan has been approved by 84.8% of the votes cast, which is more than the required votes needed. And the resolution with respect to the continuation of an amendments to the shareholders rights plan has been approved by 96.8% of the votes cast, which is more than the required votes needed. The resolution with respect to -- or the advisory vote with respect to the resolution in connection with the company's approach to executive compensation has been approved by 92.7% of the votes cast.

S. Barry Jackson

Thank you, Christine. So based on those results, I declare that the 10 nominees are duly elected directors of the company until the next annual meeting or until their successors are earlier elected or appointed.

In addition, I declare that the resolutions with respect to the reconfirmation and approval of the amendment of the stock option plan, the continuation and approval of amendments to the shareholder rights plan, and the acceptance of TransCanada's approach to executive compensation have been passed. And I direct that the scrutineers' report on the ballots be annexed to the minutes of the meeting.

Is there any further business to be brought before the meeting?

If there is no further business, I'll entertain a motion to conclude.

Unknown Attendee

Mr. Chairman, I move that the meeting be concluded.

S. Barry Jackson

Thank you. Is there a seconder for the motion?

Unknown Attendee

Mr. Chairman, I second the motion.

S. Barry Jackson

Thank you. You've heard the motion. All shareholders in favor, please raise your hand.


Contrary, if any?


Carried. Thank you.

The meeting has now concluded, the formal part of the meeting. Russ, I'd invite you to come and share your comments.

Russell K. Girling

Thank you, Barry, and good morning, everyone. And Welcome to our 2013 Annual General Meeting, and that was a fast session that you just carried through, Barry, so good news on that front.

So the theme of our annual report this year, the cover of which you can see up behind me, is "Developing North America's energy future". And for those of you that pay attention to these print versions now of annual reports, they're getting to be a bit elitist. But those of you that do these things, you'll notice that the picture that we used this year does look different than we used in the past. And we do think about what kind of messages we want to send.

This year we chose to feature an image on the cover that captures the important role that TransCanada plays in the delivery of energy to the millions of people in North America that use it everyday. It's a photo of people skating at night in Nathan Phillips Square in downtown Toronto. And we chose this image, as I said, because it sums up what we do. It's quietly behind the scenes everyday, we safely deliver electricity that keeps lights on, on our cities; the natural gas that heat our homes, our businesses, our public buildings; and we deliver the oil that's required to keep our vehicles moving. It's a responsibility that we take very, very seriously at this company.

The cover also includes some pictures of some of our 4,900 employees, and they are the most important asset that we have at our company. This year, they operated our blue-chip portfolio pipeline in power assets with an industry-leading safety performance. And it was in the top decile of performance across our peers in the industry. They've brought $3.5 billion of new assets online. They will contribute to our cash flow and earnings for decades to come. And they captured $16 billion of commercially secured new opportunities that will allow us to realize our vision of becoming the largest and leading North American energy infrastructure company.

In short, it's because of them and our employees that our strategy is working. And looking forward, and I'll share some comments with you in a moment, TransCanada is well-positioned to manage the many challenges that we have that are in front of us, and take advantage of the tremendous opportunities that exist in the North American marketplace. I'll take the next 20 minutes or so to talk about the successes that we had over last year, our challenges and give you a better idea of the many exciting things that we've got on the horizon for this company in the years to come.

Before I get started, as always, a little bit of housekeeping. I'll remind you that my remarks include certain forward-looking statements that are subject to certain risks and uncertainties. And in addition, the presentation contains reference to certain non-GAAP measures that don't have any standardized meaning and therefore aren't really comparable to similar measures presented by other entities. For more information on those risks and uncertainties and for reconciliations to the most closely related GAAP measures that are included in our recent financial reports that are filed with Canadian securities regulators and U.S. securities relators.

So now that we got that out of the way, I can get into the exciting things that are going on at your company. To start with -- I thought I'd start today with who are we and what do we do. And the message here is that we're really no longer a Canadian gas pipeline company. As you can see by this map of the assets, TransCanada is a diversified leading North American energy infrastructure company with a focus on 3 core businesses: our natural gas pipeline business, it's still large and important; our energy business that includes our power generation business and our nonregulated gas storage business; and our oil pipeline business. For over 60 years, we have delivered the energy that people need with the greatest of care for safety for our employees and for our contractors and for the environment in all of the communities where we do businesses. It's our #1 priority.

We have about 4,900 employees at our company responsible for this success, as I said. They live and contribute to communities in 7 Canadian provinces, 31 states and in Mexico.

We operate today on the gas side. We operate one of North America's largest gas pipeline networks. We have about 70,000 kilometers that taps into every major supply basin on the continent. And today, the natural gas pipeline network that we manage supplies 20% of all the gas that's consumed in North America. So 1 in every 5 households in North America gets their gas from a TransCanada gas pipeline.

We have 21 power plants in operational development, making us the largest private sector power company in Canada. We generate about 12,000 megawatts today, and that's enough power to supply about 12 million homes across North America. And about 1/3 of that power that's generated comes from emissionless carbon, noncarbon based sources that includes our nuclear power operation, our wind operation, our hydro operation and we're just entering into the solar business.

And now, over the last couple of years, we've become a major player in the crude oil pipeline business with our Keystone Pipeline System. Our existing Keystone Pipeline System has now been operational for almost 3 years, and it transports about 20% of Canada's crude oil exports into the United States, so not a bad position after only 2 years being in this business. Once the expansions are complete, the Keystone System will be capable of moving about 1.4 million barrels a day. And it's going to move both Canadian and American oil to market, and it will supply about 40% -- or move about 40% of Canada's production, and it will supply about 10% of U.S. needs. So again, coming from a dead stop a couple years ago to supplying 10% of the crude oil in the United States is a huge, huge step for our company.

There's an enviable platform of assets that we have at this company. We built it across 3 businesses, and it will be the foundation upon which we will build the future growth of this company. All of these 3 businesses are sound and solid and have great prospects for growth in the future.

Over the past few years, we have captured significant opportunities for growth in each of these businesses. In the last 3 years alone, we placed about $13 billion of new assets in the service that are now generating cash flow and earnings for us. In 2012 to give you some financial highlights of last year, our earnings were impacted by cyclically low gas and power prices coming out of the recession. Delays in the restart of the Bruce Power Units 1 and 2, the Unit 4 outage that's a -- will extend its life but it took that unit of service for a period of time, the outage of Sundance A and the delay in the resolution of our mainline restructuring [indiscernible] all had an impact on our 2012 results. But despite those challenges, the assets continued to perform well everyday. For the year ended December 31, 2012, comparable earnings per share were $1.89 and funds generated from operations are about $3.3 billion. Looking forward, we expect the results to improve as we resolve those issues that overhung our performance last year.

Today, we announced our Q1 earnings of $446 million or about $0.63 a share. That included an $84 million or $0.12 per share adjustment related to 2012's portion of the mainline decision that we received here just a couple weeks ago. I'll talk a little bit more about the NEB decision in a minute. But our comparable earnings for the quarter were about $370 million or about $0.52 per share when you exclude those amounts. And comparable EBITDA was about $1.2 billion and funds generated from operations were $916 million. So I think good performance for the first quarter of the year.

As we look forward from today, more than I've ever seen in my career, the world is in need of substantial new energy infrastructure. And it may come as somewhat of a surprise to some of you that the region that needs that infrastructure the most is North America. I think common prevailing thought would be the developing world would need infrastructure more than the North America. But as you can see by the bottom bar on this chart, the International Energy Agency predicts $6 trillion of energy infrastructure is required in North America between now and 2035 in gas, in oil and in power generation, all the 3 businesses that we happen to be in.

That need for energy infrastructure is based on 3 fundamental changes in the North American landscape that are fundamentally changing how we see the world. The first is, is new technology has led to significantly more economic and more recoverable natural gas than anyone ever thought possible. Secondly, we've seen a significant growth in Canadian oil sands and we expect that to continue and continental tight oil supply has also become more abundant and more economic than anybody thought possible. And I think the third major theme that's driving our marketplace is this transition to a less carbon-intensive energy future. And that's with us and that will be with us for a long time.

These changes obviously have presented significant challenges for some of our businesses at TransCanada. We've talked a lot about those and we're working through those issues. Primary example is the growth in shale gas. It has fundamentally altered the supply and demand picture for natural gas in North America, where we have a significantly new production coming on in traditional market zones where our pipelines served. That changing demand obviously impacts long-haul capacity for some of our pipelines. And as I said, we're working our way through those kind of issues. But at the same time, that growth in shale gas has presented tremendous opportunity for us as has the other themes that I talked about. I think most notably the abundance of clean economic natural gas presents a real opportunity for North America to reduce its dependence on coal-fired generation and migrate to other forms of generation, primarily gas. But it also opens up the door to a massive new opportunity to export North American natural gas overseas where it can realize higher prices. If you think that just a few years ago, we were thinking about importing natural gas. Today, we're now looking at exporting natural gas, a fundamental change in the marketplace. And it looks like that is the direction this is going to take for some time.

And in addition to that on the crude oil side, the long-desired goal for North America to become self-sufficient when it comes to oil, I think with the growth of oil sands, with the growth in tight oil supply, I think it's a real life prospect that we can now think about.

So as I said earlier, 2012 for us presented unprecedented opportunity. During the year, we secured $16 billion of new contracted growth projects emanating from those 3 themes. That brings our total commercially secured projects to be completed by the end of the decade to about $25 billion. And delivering on those projects will obviously have a significant impact on our growth in earnings, our growth in cash flow and our growth in dividends in the years to come.

I'd like to turn and talk a little bit about the details of those projects, the challenges that we have and how we're positioning each of our 3 core businesses to be able to participate in those major themes in the coming years.

Starting with the power side of the business. As I said earlier, Canada and the United States and the rest of the globe are moving off coal, albeit at different speeds and for different reasons. But they're both moving to replace coal-fired electricity with more efficient and more environmentally friendly sources of power. Coal is the #1 source of power generation in the United States at about 45% of the load. In Canada, it's the #2 source at about 17%.

This chart shows the relative size of the GHG emissions from coal-fired plants across North America. And the size of the circle represents the amount of GHGs. And obviously the location represents the location, and you kind of see where this migration is going to take place. As I look at this slide, I mean just to reference and it gets me off-topic here a little bit, just because it continues to annoy me a bit, the activists, environmental groups continue to call the Canadian oil sands, the largest carbon bomb on earth. I've included the green circle here on this chart, which represents -- you see in Alberta, that represents the size of the GHG emissions from the Canadian oil sands relative to the size of the emissions from the U.S. coal fleet. And I think as you can see from this chart, the oil sands represents just 6% of Canada's GHGs, and it's about 3.5% of the emissions from the U.S. coal-fired power fleet. So it's hardly the largest carbon bomb even in Canada. It's definitely not the largest carbon bomb in North America and certainly not the largest carbon bomb in the world. But obviously that's, I just said, a pet peeve. I digressed a bit from this slide, but it's facts for another speech for another day.

The real point of this slide with respect to power is, there is significant opportunity in this transition. Over time, all of these coal facilities will be replaced with new lower emission technology which includes natural gas. It will include nuclear refurbishment. It'll include solar. It'll include wind. It'll include hydro. All of which as a company, we're well-positioned to take advantage of.

So to get a little bit of how we're doing that, TransCanada is actively investing in this transformation. Last year, we placed $2.5 billion of new emissionless energy projects into service. Last October, Bruce Power became the world's largest nuclear facility with a successful completion of the refurbishment of 1 and 2 -- Units 1 and 2. For the first time in over 2 decades, Bruce Power is now producing 6,000 megawatts or about 25% of the needs in Ontario under a long-term power purchase contract with the Ontario Power Authority. So obviously an accomplishment that we're very proud of. This was followed in November by the final phase of Canada's largest wind farm coming into service. TransCanada has 62% in the Cartier wind project, which provides 590 megawatts of power under our long-term power purchase contract with Hydro-Québec. And TransCanada's $476 million investment in 9 solar facilities is expected to start generating revenues in 2013 and 2014 when those 86 megawatts come into service over those -- in the coming in 2 years.

And lastly in 2012 on the power side, we saw us add a new $1 billion project when it reached agreement with the Ontario Power Authority to build and own and operate the 900-megawatt Napanee Generating Station under again a 20-year power purchase contract with the Ontario Power Authority. This highly efficient plant and combined-cycle natural gas plant is an important part of Ontario's plan, as I said, to shut down its coal-fired fleet by the end of this year. So as I said, we are participating in that theme, and I'll turn it over to natural gas side of things here for a minute. And again, we're just seeing tremendous opportunity arise there.

But first of all, I'll talk a little -- a couple of the challenges. The emergence of unconventional gas production has fundamentally shifted the supply and demand balance in North America. The result is lower prices. In some cases that's a good thing and in some cases, that's not such a good thing. But as I said, production in our traditional market zones. On the map on this chart, you can get a better sense of the dynamic. The green areas are the traditional natural gas basins in North America and the orange areas are the emerging new tide-supplied basins.

U.S. shale gas has already become the primary source of natural gas in the United States and is expected to account for more than half of the production by 2020, so a dramatically changing landscape. Development of those basins that are located closer to our existing markets especially in the Northeastern United States, the Marcellus and Utica area has led to changing flow patterns on our pipelines; major long-distance pipelines like the Canadian mainline, ANR; Great Lakes have seen declining volumes and a shift from what we used to see as long-haul long-term firm contracted capacity to shorter term, shorter distance and shorter contracts, obviously resulting in the need for us to change our offerings of services and tools to meet those changes. The largest example and the most public example of that has been in the last several months that we spent in front of the Natural Energy Board proposing a comprehensive restructuring of the tolls and services on our mainline. We received the decision from the National Energy Board at the end of March. The board accepted several of our proposed changes but rejected several other critical components of our restructuring proposal. What they moved to was a multiyear fixed toll approach for our long-term firm services, and then they provided TransCanada with discretion for pricing of a short-term interruptible services in an effort to help us deal with those changes that I mentioned in the marketplace. TransCanada will continue to analyze that decision, but we will be seeking clarification and changes to certain elements of that decision through a review in variance application with the National which we filed in the near future. And we'll continue to work to make that business a long-term and a viable business for TransCanada.

But as I said earlier, with change, there's always challenge but there's always significant opportunity. And demand for natural gas is expected to rise by about 15 billion cubic feet a day by 2020 as gas plays the larger and larger role in electric generation that I mentioned but also in chemical production, fertilizer production and in the exports of liquefied natural gas as that starts to commence here towards the end of decade. Our strategy on these opportunities is well underway. We weren't sort of spending all our time worrying about the challenges. We're trying to capture opportunities, and we have over $13 billion of new commercially-secured gas pipeline projects that we've announced over the past year.

In Mexico, last year, we secured close to $2 billion of new projects with a state power company there, the 25-year contracts. And that country is now shifting towards natural gas for power generation by accessing this new shale gas from the United States. And they need a link between that supply in that market, and we're participating in that.

We also entered the emerging LNG market in British Columbia with 2 proposed pipelines across Northern British Columbia, to transport gas from the Montney producing region, 2 planned export terminals near Kitimat and Prince Rupert, British Columbia. The Coastal GasLink project and the Prince Rupert gas transmission project represent a combined potential investment for our company of about $9 billion. And if those projects are sanctioned, we expect that to happen later in 2014. We'd expect them to be in service in around the 2018 timeframe.

In addition, the jewel of our system continues to be the NGTL system. Our upgrading and expansion continues. In 2012, we spent about $650 million on upgrades in connections and laterals to connect new supply and new market. And we have more than $2 billion of expansion planned for that system to be completed by about 2015.

As we move to the oil side of things, again with the, as I said, oil production is growing quite rapidly. And we significantly advanced our plans to grow our business to connect. And our strategy is to connect right from the production source right through to the refinery. Crude oil production continues to grow, as I said, as new technology is employed to unlock the tight oil supplies and from the Canadian oil sands. As you can see from the graph on this chart, the lower right-hand corner, and this is just the Canadian and Bakken oils, sort of the northern oil that our pipeline is currently connect themselves to. You can see that in those regions alone, expectations are that we're going to see 3 million or 3-plus million barrels a day of incremental production, bringing the production level coming out of those locations to about 6 million barrels per day.

So the question is, is where is all that, that oil going to go? That's a lot of new production. You put it into context, Keystone Pipeline, Keystone XL, is about 8,000 barrels of oil a day. So you need 3 or 4 Keystones to move that oil to market. Our strategy, as I said, is to connect right from the production source, right to the refineries that currently import their feedstock from other places around the world. The plan is to displace other oils, primarily those feedstock coming from Venezuela, Mexico, the Middle East and other offshore locations.

The circles on this chart represents the highest of refining capacity in North America. The orange-shaded region represents the volume that is imported from offshore locations. And as you can see from this chart, the Gulf Coast is the biggest refining location in North America. And it imports more than 4 million, 4.5 million barrels a day from offshore places around the world. The Canadian East Coast, and this is something that most people don't know, is in Canada we import about 700,000 barrels a day from other places around the world, and the U.S. Northeast imports about 900,000 barrels a day.

So as I said, our strategy is to go directly, to connect growing continental supplies to these refineries displacing foreign offshore imports. And to be specific about it I guess, you can see from the chart, is geographically where we're going to go. We're going to the Gulf Coast and we're going to the East Coast, and that is Keystone and our Energy East projects.

2012 marked a successful year for Keystone itself. It marked -- we marked its second full year of operation. We've now safely delivered about 400 million barrels of oil to the United States. That's more than half of the U.S. strategic oil reserve that we've delivered from that pipeline quietly and safely over the last 2 years. And we saw EBITDA from Keystone grow to about $700 million in 2012.

In addition, last year, we began construction on the 780-kilometer Gulf Coast Project. It's now 70% complete and we expect it to be in service by the end of 2013. That $2.6 billion project will transport up to 700,000 barrels a day from the largest storage hub in the United States at Cushing, Oklahoma to the Gulf Coast into refineries in Houston and Port Arthur. None of these pipelines are built for export, as you can tell. First thing we're going to do is we're going to displace foreign supply. And it's going to take a long time for us to be able to do that.

We remain committed to the Keystone XL pipeline, which is the upstream portion of that Gulf Coast pipeline. We made significant progress in 2012 with the new route in Nebraska that was approved by the Governor of Nebraska. And we were pleased by the U.S. Department of State's supplemental Draft Environmental Impact Statement, which concluded again that the pipeline can be built safely and it will have minimal impact on the environment. And while these delays obviously are frustrating for us, time delays are never any fun when you're building things. But I believe that the finding of the Department of State will pave the way for positive decision from the President on our Keystone XL permit, and we would hope that, that would happen in the coming months.

Back in Alberta. We continue to try to attach new supply, as I said, to our hub at Hardisty, where we transport the gas -- or the oil downstream. In 2012, we were awarded $2.5 billion of new projects underpinned by long-term contracts to move crude oil out of the Athabasca region. That's the Grand Rapids project and the Northern Korea projects, as well as expansions of our Hardisty terminals to accommodate that are all under way, and we expect them to be in service between 2014 and 2017. And as you can see on this chart, there's an obvious gap in our strategy right now between Edmonton and Hardisty where we're connecting to the Keystone Pipeline. And I can tell you that we're working very hard on that and getting close to a resolution there.

We've also spent considerable time over the last year advancing the conversion of capacity of our gas mainline system to oil service to provide eastern refineries. Those are refineries I talked about earlier both in Canada and the United States. They buy their oil offshore just to -- is to provide those refineries with the opportunities attaching to themselves to western supply out here. The proposed pipeline is called Energy East has a capacity of about 850,000 barrels a day. And currently, we're contemplating delivery points at Montréal, where there's a refinery; Québec City, where there's a refinery; and St. John, New Brunswick, where there's a refinery and a deepwater port. Very pleased to date with the commercial interest that we've seen. And I would say that I'm very optimistic that over the coming months, we will solidify the commercial underpinning for this project and advance it to the next phase, which is regulatory application.

So to summarize quickly, that's a lot of projects. TransCanada intends to play a key role in building and improving North America's energy infrastructure and meeting the changing energy needs of our society for many decades yet to come. As you can see by this chart, we have $25 billion of commercially secured projects underway with $12 billion expected to come on between now and when we exit 2015 and another $13 billion scheduled to come online before the end of the decade. That doesn't include projects like our energies project or other projects that we currently are working on that lever off of the blue-chip platform that we have. So I continue to see tremendous opportunity for our company to grow in the years ahead.

This capital program obviously will have an impact on our official financial performance. They all have secured long-term contracts, and they will generate predictable growth in earnings and cash flow. If you look at the $12 billion of projects that we have in place that are in the advanced stages of development for 2015 doing those projects, we would expect EBITDA to grow from about $4.2 billion, which we saw in 2012, to more than $6 billion as those projects are placed into service. Obviously, that EBITDA growth will lead to significant increases in cash flow. And our strategy will always be to be disciplined about how we spend that is to invest our free cash in our core businesses and good projects that fit our risk profile, and to continue to grow our dividend in a way that maximizes long-term shareholder value.

We do recognize the value that our shareholders place on our dividend. Our goal is to continue to grow that dividend in conjunction with visible and sustainable growth in earnings and cash flow. For 13 consecutive years, the Board of Directors has raised the dividend from $0.80 to the current $1.84 per share. That equates to about a 7% annual increase. And our outlook for continued earnings and cash flow growth is expected to enable over the long term, our Board of Directors to continue to raise the dividend in conjunction with growth in earnings and cash flow.

So before I wrap up, a very important subject I wanted to close with today, spend a few minutes touching about -- touching on how TransCanada conducts its business and what my expectations are for ensuring that we're doing the right thing not just for our company, but for the communities in which we operate. As I said at the beginning, building energy infrastructure today isn't easy, and it's certainly not as easy as it's been in the past. And the expectations of governments, regulators, customers, the public and all stakeholders are much greater than they've ever been. And the fact is there is a heightened awareness about safety. That is just the world we live in. And it's probably for a very good reason. Serious tragic events that have occurred in our industry have happened: the BP Macondo blowout, which we all got to watch on CNN; the spill into the Michigan, Kalamazoo River; the recent spills here in Alberta and the recent spill in the Little Rock, Arkansas have all shaken public trust and public confidence in what we do. And every unfortunate incident that happens, whether it involves our company or not, has an impact on our reputation and it has an impact on our ability to move forward with all of these projects that I talked about today. So as an industry, we may have good safety record, but we need to do far better.

That's why at TransCanada, we are committed to being very involved in industry-wide reviews that are taking place in both countries, both Canada and the United States, on pipeline safety. And we're committed to sharing our best practices and the technologies that have made us an industry leader in safe and efficient operations with others in the industry. And we have a keen sense and the desire to learn from others in the industry. We don't know everything. I learn from others' experiences about how we can further improve our performance and further build an even stronger safety culture at our company. We know that building trust is about honest, respectful, open, transparent communication, and we're headed to that direction. As with everyone involved in our projects from landowners, regulators, community leaders to our business partners and even those opponents that we have to our projects, it's we have to be open, honest and transparent in everything we do. Delivering on these commitments is not an option anymore. I can tell you that there's nothing more important to our future success, but to do these things right and to make sure the public has confidence in what we do. If we do that, then we will be successful and we'll be able to build these projects and continue to build the kind of company and the kind of future that we want for our shareholders.

So to conclude, I'd say that our strategy is working. 2012 was a very challenging year for our company but we continue to successfully advance our strategy. At TransCanada, we do have the best talent in the industry. And I recognize that becoming a household name and being constantly in the media spotlight isn't easy for our employees to get their jobs done. So to all of our 4,900 employees in Canada, the United States and Mexico, I'd like to say thank you. Your efforts don't go unnoticed. Your continuing professionalism, your dedication of living our values every day is what makes us successful at this company. You should be proud of what you've accomplished in the last year and in the past years. You should know that what you're doing is the right thing to do for our society, for your communities, for your country and for our company.

I'd also like to thank my executive team for their support and leadership. They provide expertise daily to this organization to advance it. The company's stronger as a result of your leadership and it will be for many years to come. We remain committed to developing North America's energy future with safe, reliable energy infrastructure that will be in place for decades. When we put a piece of steel in the ground, it lasts 10, 20, 30 and in some cases, more than 100 years. By sticking to our strategy and our values, we will continue to grow cash flow, earnings and dividends in generate superior risk-adjusted returns for our shareholders.

So before I conclude in its entirety, I want to thank the board for their guidance and unwavering support through a number of difficult issues. I'd like to personally thank and add to Barry's acknowledgment of our retiring directors: John MacNaughton, obviously, a man who was a mentor and brought tremendous character for our -- to our company. He will be missed; Dr. Paul Joskow for his insights on regulatory issues, second to none; and Dr. Linn Draper, who joined us today, for your leadership and contribution on the H&S committee. Your contributions to building a safety culture at this company will be ingrained in everything that we do going forward. So thank you very, very much. And lastly, I'd like to personally welcome our newest director. She's been with us for a couple meetings now, Mary Pat Salamone. Welcome, and I know you've served the company extremely well, and I look forward to working with you in the coming years.

And finally, thank our shareholders for taking the time to join us today, but probably most importantly for the continued support of TransCanada. I know that most of you are long, long-term shareholders, and we've been together for a long time and we very much appreciate that relationship that we have.

So with that, at this point, I'd pass the microphone back to Chris. She will outline the rules of engagement for Q&A. And I'll just grab a drink of water, and then I'll answer whatever questions you might have. Thank you.

Question-and-Answer Session

Christine R. Johnston

Thanks, Russ. We now invite general questions from registered shareholders and proxy holders. Microphones are available for any registered shareholder or proxy holder wishing to address the meeting. Before presenting your question, please identify yourself and confirm that you are a registered shareholder or proxy holder of the company. Please limit yourself to 1 question with a duration of not more than 2 minutes. If you have additional questions, please go to the back of the queue and wait another turn at the microphone. You may also submit your questions in writing on the question cards provided to you or by email through our webcast. For those in attendance who wish to use the question cards, please raise your hand and a TransCanada representative will collect them. While the question cards are being collected, we will answer questions from the floor and questions received on cards and via the webcast submitted during the meeting. I've got a card over here.

Russell K. Girling

Chris, we can start with the mic...

Christine R. Johnston

Oh yes, please go ahead.

Unknown Shareholder

It's Andrew Pollack [ph] of Calgary, Alberta, a beneficial shareholder and proxy holder of 50 shares of stock. And I do appreciate that ordinary people like me even though I only have a half board lot of stock are able to invest in such a fine company. Not all of us can put in millions of dollars. It'd be nice, but those of us who can't still do get the opportunity to do invest on our own level and that's much appreciated. My question today, given that these questions are to be of general interest to the audience and I hope this one is, what are the key aspects of mentorship that have been impacted your life? Because mentorship, as I understand it, is very important to an executive in their growth through a company. And how has good mentorship impacted you and what do you do to bring that leadership training to those under your own leadership?

Russell K. Girling

Thank you for your support and your ownership and for the question. Because at the end of the day, it truly is how you approach things and what your values are is what helps you make decisions. And for me, I mean, a lot of my mentors are here in the room, folks that I've been able to work with over the years, folks like Dick Haskayne, Doug Baldwin, Hal Kvisle, our current board. And I'd say that the thing that I learned the most from these folks -- and I mentioned John MacNaughton earlier today. Folks that live their values every second of the day because when decisions get difficult and they do get difficult and they do get gray, sometimes you don't know exactly which way to turn. So -- to make a decision, you sort of step back into your core values and you ask yourself, "What is the right thing to do?" And having been able to work with others and see them do that everyday, make sure that they make value-based decisions, that has probably the most profound impact on me. And I'm not an expert at everything. You can't be. This is a very complex business. You have to rely upon people. You have to rely upon the values that you have in your decision-making so I have think to about what is right, what is wrong, respecting people, integrity. Those are the kinds of things I learned from the mentors. And if you employ those things every day, even when there's the opponents of the things that we do, I mean, if you treat them with respect, you may agree to disagree, but at least you respect each other at the end of the day and you can move forward to get things done. If you let things to evolve into fights and that sort of thing, you never get anything done. So I've been truly blessed to have some pretty strong-willed, value-centered folks that I've been able to work for and work with. And that's had the most profound sense. As I think about the impact that, that has on the company, every day, I mean, on the chart behind me, here you can see that values are front and center in everything that we do. And as a management team, we talk about that, what is the right thing to do in all of these situations. And it's an expectation I have of my management team. And I hope that as the younger generation that's coming up through our organization can sort of see us walking the talk about these values and they're just not written on a piece of paper. If they'll learn that, that's how they need to make decisions because we can't be there in the field when somebody has to make a decision with the landowner. What we have to do is make sure that we instill in them the sort of value-based decision-making so they can make the decisions on the ground with those people that we do business with every day in a way that we'd be proud of as a company. And when that doesn't happen, we need to take action to make sure it doesn't. But it comes back to that value center. Hopefully, that answers your question. And from the floor?

Unknown Shareholder

My name is Led Skironsky [ph]. I'm a registered shareholder of TransCanada Corporation. I have a 2-part question regarding the characteristics of the Keystone XL Pipeline and the products to be transported through the pipeline. It is my understanding that the main purpose of building this pipeline is to export bitumen from Alberta's oil sands to refineries in Texas. In order for the bitumen to flow through the pipeline, it must be diluted with a diluent such as naphtha. Some bitumen pipelines are actually 2-parallel pipelines, 1 to transport the diluted bitumen and another to return the diluent to the source so that it can be used again. So the first part of the question is, is this the case of the Keystone XL Pipeline? Secondly, last year's Enbridge pipeline spill in the Kalamazoo River in Michigan showed that diluted bitumen causes much more harm and is much more difficult to recover from then conventional or synthetic crude oil. Therefore, do you think it would have been easier to get U.S. approval of the Keystone XL Pipeline if synthetic crude oil upgraded from bitumen in Alberta was the plan to export product rather than diluted bitumen?

Russell K. Girling

I'd say that the -- to answer your first question, what is the purpose of the Keystone Pipeline? Its primary customers, the bulk of the customers are heavy oil producers here in Alberta. But we'll also move synthetic oil out of Alberta, conventional light oil out of Alberta and Saskatchewan, as well as we have on ramp in Montana to pick up light oil in the United States. So of the 830,000 barrels a day, if I was to roughly guess, I would say that it's probably 70% oil sands-based pipeline. With respect to your second question on whether or not approvals would be easier with -- if it was all light oil, I'm not sure about that. The pipeline itself has been proven through for and by environmental impact reviews that the pipeline itself will have no impact on the right of way. It will have no impact on the development of the Canadian oil sands, yet it continues to have this opposition. And that opposition, I think comes fundamentally from folks that are opposed to fossil fuel consumption, oil development and the development of the oil sands. So those folks, whether we upgraded the oil here in Alberta or -- and shipped it to the United States or whether or not we continued to move what's called synthetic bitumen or diluted bitumen to the United States wouldn't make a difference there. Their goal is to shut down the Canadian oil sands, and they continue to go down that path. I think with -- just so I can comment on the one point you made with respect to bitumen somehow having different characteristics and making bit more difficult to clean up, I don't think there's evidence to support that fact. I mean diluted bitumen is the same as any other crude oil that moves through the system. It's been moving for probably 30 or 40 years through the system. Emergency response cleanup is all identical. The product that it's diluted with aren't any more corrosive or carcinogenic than common crude oil is. For the most part, we're using condensate, which is basically it's almost natural gasoline, as what most people refer to it as. In a lot of cases, it's clear and unrefined. You could probably put that into your gas tank almost. So it's not an uncommon substance that is -- that people should be frightened of. But I think that the economics really dictate today that the best solution is to move the heavy oil from Canada to the Gulf Coast, as I said earlier, and displace Venezuelan oil. And Venezuelan oil, heavy oil, has almost identical chemical properties and characteristics to those of the Canadian oil sands. So I think from a North American efficiency perspective, it's best to utilize existing refining capacity that exists in North America to upgrade that oil to gasoline and other products that the North American marketplace needs. Thank you for the question.

So there's a question on the Mainline review and variance application that we'll make. I wouldn't get into too many details because that's sort of what are the details of what's coming there. There are some issues that we have with it around the services if we're going to move to a place where we need discretion around interruptible services. We have to make sure that those things work properly. The timing that we think is requested I think is going to be difficult. This is a fundamental change in the contractual structure of our system. We have to work with our customers to implement the new services that we applied for. And so we'll be looking around the timing of implementation and those kinds of things will be the kinds of things that will be included in our review of variance [ph] and those will become more evident next week as we actually nail down the specifics of what that is [ph] going to look like. But obviously, a good question.

The question is -- although the question might be redundant. What's the latest on the approval for the Keystone Pipeline from the U.S. government sources? The latest facts that we have is the Department of State has completed its comment period for the Draft Environmental Impact Statement that it issued in March. That closed on April 22. What they've indicated to us is that they'll have at least 60 days to go through those comments. There's over 1 million comments that have been made. They have to log those in and respond in some way to all of those comments, and then issue what's called the Final Environment Impact Statement. We would hope that by early summer, we would have a Final Environment Impact Statement and then they move to what's called a National Interest Determination period. They haven't specified the time for that National Interest Determination period yet. The last time we went through it, the government specified that it would be 90 days. We would argue that there -- that they spent 79 days the last time getting through that. And so we could argue for a shorter period of time. But that's not to say that the time frame would be shorter. But those are the 2 main time frames that we're dealing with. And then once the National Interest Determination is complete, it moves to a recommendation for the President to issue a -- or not issue a permit. And I would hope that based on the facts and the draft that we saw to date that, that paves the way to a positive decision.

So the next question was with respect to the priority of, if -- with the Keystone delay, what's the priority for a reversal or repurposing of our Mainline? And I would say that, as I said earlier, I think the marketplace is going to need the Keystone Pipeline and it's going to need many more Keystone look-alike pipelines, 500,000 or 600,000, 700,000 barrels a day. We're going to need to move 2 million to 3 million barrels a day over the next couple of decades out of the Western Sedimentary Basin. So without Keystone, there's a priority to get this oil to market. Those refineries in Eastern Canada and the Eastern United States basically pay world prices today for their oil, where in Western Canada, we're getting a discount of some $30 to $40 a barrel. So you could see that they're paying Brent-like prices. They're paying a high price, which means that the gasoline prices in those regions are a lot higher than they are in the western regions. So from a refining perspective, they have a great urgency to try to want to get that back here to the west to buy the supply. And what we're seeing is railcars now moving all the way across Canada and across the United States to access those eastern refineries. So it's already happening. The urgency is already there. And so we're running as fast as we can on both of these projects, that they're both high priority and we're working as hard as we can to get them done as quickly as we can. But like with all things that we deal with these days, we have to be methodical and you have to dot your Is and cross your Ts in everything that we you do. Because if you don't, that's only going to cause you delays later and later in the process. So we're being very careful about how we approach this Eastern Canadian proposal and making sure that we'd spend time with our customers, understanding their commercial support for the project, but as well with other stakeholders, landowners, Aboriginal groups, politicians, mayors along the system making sure that we understand what people's needs and concerns are before we step out of the curb with the new project. We want to make sure that we incorporate a lot of that thinking into our project first. So we're being methodical, but make no mistake. We're going as fast as we can. And as I said earlier, I have a fairly high degree of confidence that this is something that the marketplace really wants. Any other questions?

It's a question about natural gas pipeline in the Northwest Territories and where we are on the project. I'm assuming this is the Mackenzie Valley project. And the question is, have we stopped spending money on the project?

We have, basically. We ramped down our spending on the project. With the abundance of shale gas in the Lower 48 and in Canada, the Mackenzie Valley gas is challenged to get that gas to market. That's not to say that the world is not going to change again. What we know in this marketplace is that the world does change, and we want to be positioned for that when it comes. So we received a Certificate of Public Convenience and Necessity for that pipeline. And basically, what we've done is we have now shelved that option. We continue to have to maintain the permits and do the things we need to do, but it's sort of a minimal amount of spending in order to maintain that option. My view is the Canadian North does hold a tremendous amount of resource that will be needed by the marketplace at some time in the future. And we need to make sure that we maintain our options to be able to do that. We'll take another question from the floor while I'm reading the questions here.

Unknown Shareholder

Yes, I got to the back of the queue. So...

Russell K. Girling

You didn't have to go very far.

Unknown Shareholder

Again, Andrew Pollack [ph] of Calgary, Alberta, beneficial shareholder and proxy holder of TransCanada Corporation. And bit different kind of question. Again, I'm sure I'm oversimplifying things here, but let's see. With respect to, say, the possibility in the future of a takeover offer on TransCanada and the possibility of the board recommending acceptance of such an offer to shareholders -- let's see -- now, assuming agreement between TransCanada and the organization suggesting a takeover, with respect to both the present and future value of the company, how would you calculate an acceptable takeover offer? Presumably, in that sort of circumstance, it comes down to the difference between those wanting to take over the company, see the future value to sufficiently greater than the takeover price that it's a worthwhile investment for them. The ones selling would be making a choice with respect to the time value of money saying they want greater cash now, right now than the present market cap indicates the company's worth. Now would you calculate that on the basis of a percentage premium on market capitalization or a percentage premium on enterprise value? How, in simple terms, would you make a calculation to determine whether or not the board ought to recommend a given takeover offer to shareholders for acceptance?

Russell K. Girling

I guess I could start with there is no imminent takeover offer that I'm aware of in the marketplace. But it's always a question that's on our minds. I think that like any company, that's always a possibility out there. But we are an extremely large company and that narrows the field of those that might do something like that. But your question was around sort of a valuation and how you'd come to value. And I think you pointed out, I mean, it has a number of variables that go into the calculation and different people have different perspectives on how you weighed each of those values. I think, obviously, that ourselves, myself, the management team, the board, would obviously have to look at whatever that offer that came in was and look at it relative to all our plans and what we think this company's worth and it incorporates all of those things and coming to the determination of whether or not our shareholders are best served by that offer or whether we're best served by rejecting that offer. And I can tell you that I think we have a very solid and good plan moving forward that will generate tremendous value for this company, that gives us tremendous confidence in any of those kinds of conversations. As I've said, there isn't anything imminent right now and it is a difficult kind of equation when it comes, and it incorporates all of the factors that you mentioned. Our -- I'd tell you my #1 goal and I'm sure the #1 goal of our board is to maximize the value for our shareholders, and that will be -- that would be the primary consideration. And there's no answer I can give you today because it's sort of hypothetical. But I appreciate the question.

What is the ratio of dividend to earnings payout? And the -- historically, we've been in sort of the 70% to 80% of earnings. About 1/3 of cash flow has been the kind of place that we were trying to kind of place ourselves in. Some of our shareholders suggested we should go higher than that. My experience would suggest that as you migrate up your percentage, the -- your yield starts to rise and you haven't added any shareholder value by increasing the dividend. So our objective is to find that right spot where our dividend payout ratio maximizes shareholder value. Our ratio at this point in the cycle is higher than it's been historically. We're probably in the higher end of the range, the 80%-ish kind of the end of the range. I'm comfortable being there based on what we've got coming in the future. Today, our earnings are constrained by the amount of capital that we've got employed in building out our infrastructure that isn't receiving any earnings today. It will have earnings in the future. So we've tried to balance that as we've increased our dividend over the last few years. But that -- the range has been in that 70% to 80% historically. We're at the upper end of that range. And as long as we can sort of see the increased earnings going forward, we can stay there, where earnings will pick up in later years. But those are the considerations that we have. On an annual basis, we sit down with the management team and the board. We look at our future plans. We look at where -- what the dividend payout ratio is relative to both earnings and cash and trying to understand what impact it will have on shareholder value. And we make our decision based on that group of facts on an annual basis.

Does TransCanada have any e-growth for the next 5 years if Keystone is approved or not approved? And I think you'll clearly -- Keystone getting approved, you can clearly see what the cash flow and earnings impact of that is. It's fully contracted pipeline at this point in time. But over the next couple of years, we've also got that the balance of all of those projects that I talked about. In this year, as I said, we brought $3.5 billion of projects. In the Northeast United States, we resolved some of our issues with the New York independent system operator around capacity pricing. The Sundance A unit will come on at the end of this year. We've got the Bruce 1 and 2 units just as we came out of the first quarter. They're starting to run at full power. Unit 4, life extension is now complete. Our Mexican projects will come on in 2014, 2015, 2016. Expansion of our Alberta System, the Grand Rapids projects, the Northern Korea projects. So Napanee. We have a number of projects outside of Keystone. So there is visible growth coming from sort of the same kinds of sources that the Keystone is. So Keystone is a very important building block for our company, but it is not by any means, even the majority of our growth going forward. It's an important part, as I said, but certainly not an overwhelming majority that is driving everything that the company does.

And I think that was all I had for questions here. There's more? So the next question is about share issuance and whether or not we have any plans on issuing shares in the coming years.

I'd say that our -- the way we're currently looking at our capital program, the answer is in immediate term. The answer is no. Based on, what, the $12 billion of approved projects that we've got between now and 2015, we don't think that's going to require the issuance of equity. The question is where do we get on the capital from. The way that we think about it as we go to the cheapest sources of capital first, we also have to think about our balance sheet at the same time. So we'll maximize our debt leverage and we have tremendous access still to those markets. We'll look to what we call the mezzanine cap market, which is preferred shares and preferred securities. And we'll look to maximize that. We're looking at doing what we call drop-downs into our national limited partnership in the U.S. It is a vehicle that we've always said is a vehicle to finance the future growth of the company. So I think you can expect to see in the coming months more drop-downs into that vehicle. And then we would also look to our portfolio. As there are certain assets that I would say are underscored, don't fit with our future as well as some of maybe the new assets that we're looking at. And we'll look hard at those assets as well before we would look at any sort of common equity issuance. If we're so fortunate as to get the $25 billion of projects plus a whole bunch of more projects, obviously, we'll have to take a look at what the best source of funding those things are to add shareholder value. And but at the current time, we have no plans on issuing equity.

So the next question is around Keystone and if it doesn't go, what's the financial impact? And I think what we've said we've got about $2 billion into Keystone at the current time. About 1/2 of that would be recoverable. So that would be, with the impact, we'd redeploy those portions into other projects whether that be pipe or pumps and camps and other things that we would redeploy into our other projects. But that's essentially the financial impact of Keystone at the current time. As I said, our current intention is to get an approval, but we're managing those costs as prudently and as carefully as we can.

And then the last question I have here is, why didn't we build along the existing Keystone Pipeline route to avoid all of the immense hassles that we've had on this particular route. And I guess, the first reason that we built along that first route was we converted a line on our Mainline. And if you recall, the line kind of goes from the Alberta border through the Winnipeg and then goes straight south to Cushing and on to the Gulf Coast through the -- in the Gulf Coast Project. The reason that we went across the Prairies, when you build a pipeline, the least environmental impact is the shortest distance. And that definitely wasn't the shortest distance, but we had the opportunity to convert a pipe so we didn't need new right away. And so it actually turned out to be the shortest distance. At that time, we didn't have another pipe to convert. And as well, we were looking at potentially picking up some of the crude oil as we went through the Montana in the Bakken area of the United States, where we could pick up additional volumes. So we picked the straightest line between the supply location and where we needed to deliver it to, which was Steele City, Nebraska. And then based on that, we went to work specifically on the right of way itself. And we probably made 2,000 or 3,000 adjustments to that route along the way to make sure that we went around environmentally sensitive areas, the dugouts, Aboriginal burial grounds. Whatever they might have been, we made sure that we went around those things. So we picked, I think, the very best route. The Department of State analyzed all of the routes that were available to us, including that first route, and came to the conclusion in the Final Environmental Impact Statement that we received in 2011 that the route we picked was the very best route. Then we went into the National Interest Determination and they asked us to look at alternative routes through that small piece in Nebraska. We voluntarily -- even though we had a Final Environmental Impact Statement that said that we had an environmentally sound route, we voluntarily agreed to reroute our pipeline in Nebraska. I think we found a better route in Nebraska. It was reviewed by the Nebraska Department of Environmental Quality on that route. So I do think that we have what today is the very best route. We've been asked again by the EPA to look at routes again, but these routes have been analyzed for the last 5 years. Going to another route, whether that be along or existing right of way or otherwise, would not satisfy those that are opposed to our project. They are fundamentally opposed to development of the Canadian oil sands and will do everything that they can possibly do to shut us down. And it doesn't matter where our route is. There is no conversation about science or pipeline safety. That's not what we're discussing with those groups. We're discussing the shutting down of the Canadian oil sands. So I personally don't think that moving the route to the existing route, which has been suggested by some folks, would have been any easier. In fact, it has more river crossings. It's longer and it doesn't suit the purpose of what we're trying to accomplish. So I think we picked the very best route. And the latest Draft Environmental Impact Statement says that, that route has minimal impact on the environment. And as a pipeline company, there's not much more that we can do than that, but continue to get the facts on the table and make sure that the regulator and others understand as they make their decision.

So with that, I think -- I have a question. Okay, and one question left. What will the shift in natural gas production do to the Canadian Mainline assuming Eastern Canada will get supply from the Utica, Marcellus Basins? That is the reason for our structuring proposal. Eastern Canada will not get all of its gas from Utica and Marcellus. It will get part of its gas still from Western Canada as well. We still deliver gas into the midwest area of the United States. So those are the things that we're working through. I continue to believe that the Mainline has a very viable future. At the eastern end of the Mainline, we are bringing in Marcellus gas into the system. The eastern part of our system is a full every day. It's in the western parts of the system, where we see a decline in volume. But if you're in Northern Ontario, for example, which is one of the challenged areas for our pipeline, across Northern Ontario, there is no other alternatives to get your gas except for they get it from the TransCanada Mainline. So we have to work through those issues as to how each of those customer groups are allocated the costs of our system and then how we'll recover the costs in our system. But I think in my view, the system is still viable. And the question that arises is, who pays and how do they pay as opposed to whether the system has a future or not. I think it still has a very bright future. If you look at the volumes that are moving even today, we're moving about 2 billion cubic feet a day today. It's still across from east to west around 2 billion cubic feet a day. The eastern part of the systems got 4 billion cubic feet a day in it or more. It's still one of the single largest delivery systems of natural gas in North America, and it plays a critical role in keeping people's houses warm and keeping the economy going. So we need to work through those issues on the who-pays side, but it doesn't undermine the sort of the true economic value of the pipeline.

So with that, I'd like to close on the day. And again, thank you, all, very much for joining us today at this meeting. There are refreshments out in the foyer. Our officers and directors have name tags on their coats. They're available to talk to you. They're -- and as I said, transparent and open communication is what we're all about so feel free to grab them and have a conversation. And I'm reminding the media that we do have a brief conference in Quarterhorse A and/or B and C. And then just go out the foyer to the left here and you'll find out where to go.

So again, thank you, all, very much for joining us today, your continued support of TransCanada. And I appreciate all of the questions today. And I look forward to a bright and prosperous future of our company. Thank you very much.

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