MANAGEMENT ’ SDISCUSSIONANDANAL YSIS North American Pipeline Ventures (NAPV) is comprised of TransCanada’s direct and indi- rect ownership in various natural gas pipelines and pipeline-related businesses throughout North America, as well as project development activities related to TransCanada’s pursuit of new gas pipeline opportunities. TransCanada’s proportionate share of net income from NAPV was $102 million in 2001, a decrease of $15 million compared to 2000, which included a one-time gain of $7 million from the sale of a 49 per cent interest in Tuscarora to TC PipeLines, LP. Excluding this gain on asset sale in 2000, NAPV’s 2001 net earnings decreased $8 million when compared to the prior year. This decrease is primarily due to increased costs related to TransCanada’s north- ern development activities in 2001. In addition, pipeline business development costs were higher in 2001 as a result of increased activity levels. NAPV’s 2000 net earnings of $117 million were relatively unchanged from 1999, exclud- ing the $47 million after-tax gain on the sale of Northern Border to TC PipeLines, LP in 1999. TransCanada actively continues to pursue gas pipeline development and acquisition opportuni- ties in Canada and the northern tier of the U.S., where these opportunities are driven by strong customer demand and sound economics. TransCanada holds a 33.4 per cent interest in TC PipeLines, LP, a publicly-held limited part- nership. It was formed to acquire, own and participate in the management of U.S.-based pipeline investments. It is managed by TransCanada and holds a 30 per cent interest in Northern Border and a 49 per cent interest in Tuscarora. In July 2001, TC PipeLines, LP increased its quarterly distribution from US$0.475 per unit to US$0.50 per unit. This repre- sents the second increase in the partnership’s quarterly cash distribution since the commencement of operations in May 1999. In October 2001, Northern Border completed construction of Project 2000 which consist- ed of a 55 kilometre pipeline extension providing 545 MMcf/d of incremental transportation capacity to North Hayden, Indiana. In addition, Northern Border’s delivery capability into the Chicago area has been expanded by approximately 30 per cent due to Project 2000. In January 2002, the U.S. Federal Energy Regulatory Commission (FERC) issued a final certificate approving Tuscarora’s proposed expansion which would enable the company to meet new service requests. The proposed expansion consists of three compressor stations and a 23 kilometre pipeline extension that will pro- vide approximately 93 MMcf/d of incremental transportation capacity at an estimated cost of US$60 million. The expansion is expected to commence commercial operations in late 2002. In December 2001, Iroquois received final FERC approval to construct the US$210 million Eastchester Expansion project. Construction on this project, which will extend Iroquois’ system from Long Island into the New York city mar- ket, is scheduled to begin in the spring of 2002. Full service is expected to commence by March 2003 and will provide an additional 230 MMcf/d of new service into this market. TRANSCANADA 24 NORTH AMERICAN PIPELINE VENTURES – FINANCIAL REVIEW NORTH AMERICAN PIPELINE VENTURES – OUTLOOK TC PipeLines, LP Iroquois Eastchester Expansion GREA T LAKES  Great Lakes Gas T ransmission Limited Partnership (Great Lakes) connects with the Canadian Mainline at Emerson, Manitoba and serves markets in central Canada and the eastern and midwest- ern U.S. TransCanada has a 50 per cent own- ership interest in this 3,387 kilometre pipeline system. Northern Border is a 2,010 kilometre natu- ral gas pipeline system which serves the U.S. Midwest with a con- nection from Foothills. T ransCanada indirectly owns approximately  10 per cent of Northern Border through its interest in TC PipeLines, LP.  Iroquois connects with the Canadian Mainline and delivers natural gas to customers in the northeastern U.S. T ransCanada increased its interest in this 604 kilometre pipeline to 40.96 per cent in 2001. NOR THERN BORDER  IROQUOIS