RICHARD F. HASKAYNE Chairman of the Board HAROLD N. KVISLE President and Chief Executive Officer  LETTER TO SHAREHOLDERS 2001 Annual Report 2001 was a challenging year for North Americans, in business and in our personal lives. Like others, the people of TransCanada rose to the challenges of September 11th, deliver- ing natural gas and electric power to all our customers in Canada and the United States without disruption. TransCanada also weathered the financial turmoil of late 2001 better than most. We are pleased that the difficult decisions taken in 1999 and 2000 have posi- tioned the company to perform strongly throughout the business cycle. TransCanada exceeded our key performance objectives in 2001, generating strong earn- ings and cash flow and further strengthening our financial position. Details are provided on the previous page. TransCanada has now completed the restructuring that began in late 1999, and we look forward to growing and prospering in our chosen businesses of natural gas transmission and electric power.  TransCanada today is about spirit, confidence and focus. Over the past two years our operating, development and corpo- rate teams have achieved significantly higher levels of performance, and further accomplishments will come through continuous improvements in the way we do business. Our leadership team is smaller and more focused and we are proud of the results we have already achieved. The people of TransCanada are second to none, and we take this opportunity to thank them for their dedication and commitment. TransCanada’s 2001 achievements are a direct result of their efforts. TransCanada aspires to be the most profitable, competitive and reliable provider of natural gas transportation and power services across the northern tier of North America. Throughout the company, we are acutely focused on cost control, cost optimization, and safe, reliable operations. We are fully committed to operational excellence in both gas transmission and electric power. In 2001, we saw excellent results from performance incentive arrangements in our regulated gas transmission business. Under those arrangements, we’re motivated to reduce costs and improve performance to the benefit of both TransCanada and our highly valued customers. We believe incentive arrangements will be an important part of our regulated business model in future years. We expect the next ten years will be the most exciting period in the history of TransCanada. We are constantly evaluating opportunities with an emphasis on new developments and strategic acquisitions that add significant shareholder value. Economic forecasts indicate there will be a significant increase in North American natural gas demand over the next decade. Much of the projected increase will come from markets that TransCanada serves today. In the near term, we are focused on connecting new supplies of western Canadian gas and delivering that gas to our northern tier markets. Longer SEIZING OPPORTUNITIES FOR GROWTH  DELIVERING STRONG TEAM PERFORMANCE  TRANSCANADA  2