TransCanada Receives Favourable Ruling with Sundance A Power Purchase Arrangement Arbitration Decision

TransCanada Corporation TRP has received a favourable decision from an independent arbitration panel regarding the dispute over TransAlta Corporation's Sundance A force majeure and destruction claims. The arbitration panel was selected by TransCanada, TransAlta and the Alberta Balancing Pool. "We are pleased the independent panel has determined the Power Purchase Arrangement (PPA) should not be terminated, and we look forward to receiving the economic value that Sundance A provides to TransCanada," said Russ Girling, president and chief executive officer, TransCanada Corporation. "As the independent panel ruled, it is now up to TransAlta to decide how it will honour this decision and establish a reasonable schedule to return the Sundance A units to service." Under the PPA, TransCanada is entitled to 100 per cent of the generating capacity of the 560 MW Sundance A coal-fired power generating facility until the PPA expires at the end of 2017. In December 2010, Sundance A Units 1 and 2 were withdrawn from service and shortly thereafter, TransAlta claimed force majeure and economic destruction under the terms of the PPA. These claims were heard by the independent arbitration panel earlier this year. In summary, the independent panel has ordered TransAlta to rebuild these units and limited their force majeure claim from November 20, 2011 until a period of time that the units can reasonably be returned to service. As of March 31, 2012, TransCanada had accrued $188 million of pre-tax income since TransAlta withdrew the units from service. As a result of the panel's decision, the company expects to realize approximately $138 million of this amount and will record a charge to earnings in the second quarter for the remaining approximate $50 million ($37 million after tax or $0.05 per common share). Of the non-recoverable balance, $30 million and $20 million relate to amounts originally recorded in first quarter 2012 and fourth quarter 2011, respectively.