• We are initiating coverage of three names in the Canadian energy infrastructure sector:
TransCanada Corporation, Enbridge Inc. and Gaz Métro Limited Partnership
• The three companies represent attractive plays on the long-term bullish theme in energy infrastructure,
with minimum near-term commodity price risk and defensive characteristics
• With major projects currently underway, both Enbridge and TransCanada offer ‘locked-in’ earnings and
dividend growth for the next couple of years
• We currently prefer TransCanada over Enbridge based on relative valuation metrics, its attractive riskreturn
profile and superior long-term growth prospects, including free options on massive infrastructure
developments
• Gaz Métro is likely to offer ‘sideline’ performance over the near term as the downtrend in risk-free rates
keeps pressure on regulated return on equity
Event. We are initiating coverage of three names in the Canadian energy infrastructure sector: TransCanada Corporation,
rated Buy–Average Risk with a C$39.00 target price; Enbridge Inc. rated Hold–Average Risk with a C$42.75 target price; and
Gaz Métro Limited Partnership, rated Hold–Average Risk with a C$14.00 target price.
Implication. Financial market turmoil and the prospect of a protracted recession have significantly reduced valuations for
TransCanada and Enbridge, despite their strong regulated businesses and limited exposure to commodity price risk. Over the
near term, both TransCanada and Enbridge should produce ‘locked-in’ earnings and dividend growth as a result of several
major infrastructure projects that are currently under construction. Additional long-term development prospects make
current valuations even more attractive for patient investors with longer investment horizons. We believe investors should
take advantage of the current opportunity by picking up TransCanada at a discount. Meanwhile, investors should be patient
with Gaz Métro, given the negative effects that low interest rates have on the regulated earnings from the partnership’s
Québec natural gas distribution activity. While we believe that the partnership’s distribution is safe until at least the end of
FY09, its earnings payout ratio is likely to exceed 100%, which could be unsustainable over the longer term. In light of this, we
remain cautious on the name.
Recommendation. Our C$39.00 target price for TransCanada and C$42.75 target price for Enbridge are derived primarily
from our relative valuation work based on P/E multiples of 15.1x and 17.5x, respectively, applied to our 2010 earnings
estimates. We support our target prices for both companies with secondary valuations based on our 10-year DCF models. Our
C$14.00 target price for Gaz Métro is based on a probability-weighted average of the partnership’s distribution yield under
several different scenarios.

Table of contents
3 Executive summary
3 Why them?
3 Why now?
3 Which do we prefer and why?
4 Investment drivers
4 TransCanada Corporation
5 Enbridge Inc.
6 Gaz Métro Limited Partnership
7 We prefer TransCanada over Enbridge at this time
7 Other investment considerations
10 Industry outlook
10 Crude oil market outlook
16 Natural gas market outlook
25 Power market outlook
28 TransCanada Corporation (TRP)
28 A defensive play—with a growth option: Initiating coverage with a Buy rating and C$39/share target
29 Company overview
32 Ownership structure
32 Growth initiatives
34 Investment highlights and key risk factors
35 Financial forecast and valuation
40 Enbridge Inc. (ENB)
40 Recession-proof assets fairly priced: Initiating coverage with a Hold rating and C$42.75/share target
41 Company overview
43 Ownership structure
44 Growth initiatives
46 Investment highlights and key risk factors
47 Financial forecast and valuation
52 Gaz Métro Limited Partnership (GZM)
52 A few hurdles before growth: Initiating coverage with a Hold rating and C$14/share target
53 Company overview
54 Ownership structure
54 Growth initiatives
56 Investment highlights and key risk factors
57 Financial forecast and valuation
63 Appendix A: Regulatory background
63 Overview
63 Gaz Métro’s Québec distribution activity (QDA)
66 Power regulation
68 Appendix B: Trading comparables

Executive summary
Why them?
We believe TransCanada, Enbridge and Gaz Métro offer investors attractive ways to buy into long-term energy infrastructure
growth, with minimal exposure to the inherent volatility of commodity price cycles. The attractive risk-return dynamic of their
regulated energy businesses (eg oil and natural gas transportation and distribution) allows for consistent returns, stable
earnings and cash flow, and good long-term growth opportunities. Furthermore, their strong risk management practices, longterm
contracts with creditworthy counterparties and long-life assets provide additional financial and operational security. As a
result, the three names are able to offer healthy dividends and a strong outlook for long-term dividend growth. Investors
should also note their blue-chip, large-cap status (in the case of ENB and TRP), strong shareholder base (with large institutional
holdings) and defensive trading characteristics (low market betas), all of which provide good support for their market floats. All
in all, TransCanada, Enbridge and Gaz Métro represent attractive value investments, with significant opportunities for long-term
earnings and dividend growth.
Why now?
Recent financial market turmoil has reduced valuations across virtually all sectors. In many cases, underlying fundamentals
remain weak, clouded by the threatening shadow of a protracted economic recession. Despite the numerous doom-and-gloom
forecasts, we believe that the current downturn represents an attractive entry point near (or at) the cyclical economic bottom
for energy infrastructure. While the short-term outlook from many market watchers remains cautious, we believe that
TransCanada and Enbridge will be able to meaningfully grow earnings and dividends throughout the current weak economic
period, thanks to large infrastructure projects already under construction. Furthermore, using conservative growth assumptions
for the oil, natural gas and power sectors that reflect the effects of a recession, we see significant long-term potential upside for
both companies—which has largely been ignored by the market in TRP’s case. In the case of Gaz Métro, earnings could come
under pressure over the near term from persistently low interest rates, which could threaten the sustainability of the
partnership’s distribution. The introduction of SIFT taxes in 2011 could further impact earnings. As a result, we remain cautious
on the name. However, we also see good long-term earnings growth (and a potential distribution increase) for Gaz Métro by the
middle of the next decade as a result of its wind projects and potential LNG plant. For the most pessimistic of investors, we
would recommend the three names on the basis of their current yields, which are likely to account for a significant portion of
expected total return.
While the three companies covered herein have been historically well covered by industry analysts, we believe that our report
provides a timely one-stop shop for in-depth analysis of industry fundamentals and recent trends. Moreover, we explore in
detail the investment drivers behind the three companies in this report. We believe that this report will offer readers an
opportunity to better position themselves within the current puzzling economic context.
Which do we prefer and why?
At the present time, we would recommend TransCanada over Enbridge. We believe TransCanada offers superior return
potential due to (1) recent events that have worked in Enbridge’s favour, such as TRP’s equity issue in November 2008 and
ENB’s dividend increase in December 2008, (2) greater value and visibility on TransCanada’s near-term growth prospects (in
2010), especially in TRP’s power business, which could offer investors an additional edge during an economic recovery. (3) our
view that Enbridge’s earnings growth in the immediate term (2009) is almost fully reflected in its share price, (4) TransCanada’s
‘free’ call options on massive growth projects in Northern development and nuclear power, and (5) a favourable relative
valuation for TransCanada vs Enbridge.

Investment drivers
TransCanada Corporation
Description and key characteristics. TransCanada is one of North America’s leading energy infrastructure players, and
Canada’s largest natural gas pipeline developer. The company owns over 59,000km of regulated natural gas pipelines and 370b
cubic feet (bcf) of natural gas storage capacity. Its network moves ~20% of all North American gas production, primarily from
the Western Canadian Sedimentary Basin (WCSB) to most major Canadian and US markets. TransCanada is also a leading
continental independent power producer and marketer, with ownership interests in 10,900MW of capacity diversified across all
major fuel types, located primarily in key growth markets such as Alberta, Ontario and the US Northeast.
Earnings stability and risk profile. With a corporate credit rating of A- (S&P), the company is among the highest quality
corporate bond issuers in Canada. Its corporate credit rating is a direct reflection of the quality of the company’s earnings and
cash flow streams, which have exhibited a high level of predictability and sustainability over the last several years, underpinned
by the company’s regulated pipeline operations and contracted power sales. In addition, the company maintains a strong
balance sheet (58% adjusted debt-to-total capitalization in 3Q08) and excellent liquidity resources (C$3.7b in unutilized credit
facilities).
Growth—‘energized’ and ‘piping’-hot. Since 1999, the company has maintained its dividend payout ratio at 60–70% of EPS,
while achieving EPS growth of 8.9%, funds from operations (FFO) growth of 11.6% and dividend per share (DPS) growth of 6.7%.
We expect TransCanada’s EPS, FFO and DPS to exhibit similar growth trends in the future, given over C$15b worth of capital
deployment opportunities spread between pipeline network development (natural gas and crude oil) and expanding power
operations. We expect TRP’s growth will be largely back-ended (ie 2010 and after) as the company integrates the Ravenswood
acquisition and as the Bruce A restart comes online. In addition, Keystone should play a significant role; the company’s flagship
crude oil pipeline construction project from the Alberta oil sands to refineries in the US Midwest and on the US Gulf Coast
(USGC) represents up to two-thirds of TRP’s total capital deployment as well as a longer term earnings growth platform that
could potentially be used as a springboard for future crude oil pipeline development.
Financials, valuation and recommendation. We expect TransCanada should be able to grow its EPS by ~7% pa over the next
few years, driven primarily by the factors mentioned above. Potential dividend increases are likely to match the company’s
earnings growth, in our view. Given the nature of TransCanada’s mostly regulated business operations, we believe that an
Average risk qualifier is appropriate for the company. Our C$39 12-month target price is based upon a 15.1x P/E applied to our
2010 EPS estimate of C$2.57. At a closing price of C$32.79 as of January 26, 2009, our target price reflects a potential total return
of 23.3%, inclusive of the current C$1.44/share dividend. Given our Average risk qualifier and the potential 12-month total
return, we believe TransCanada’s shares merit a Buy rating. We are initiating coverage of TransCanada Corporation with a
Buy–Average Risk rating and C$39 target price.

Enbridge Inc.
Description and key characteristics. Enbridge is one of North America’s leading energy infrastructure players, as well as
Canada’s premiere crude oil transportation company. The company operates the world’s longest crude oil and liquids pipeline
system (the Enbridge Mainline), which delivers ~2m barrels per day (bpd) of petroleum products from Alberta to the US
Midwest. In addition, Enbridge has interests in several other regional crude oil and natural gas pipeline systems across the
continent. The company also plays a significant role in Canadian natural gas distribution through its wholly owned Enbridge
Gas Distribution subsidiary and indirect ownership interest in Gaz Métro Limited Partnership.
Earnings stability and risk profile. Enbridge’s business model is focused on providing investors with stable income and visible
low-risk growth. Over 95% of the company’s earnings come from regulated businesses across Canada and the US, with minimal
risk exposure to commodity prices, transportation volumes, interest rates and capital costs. Over the past 10 years, Enbridge has
exhibited the most consistent record of earnings and dividend growth among the three energy infrastructure players discussed
in this report, with compound annual growth rates (CAGR) for EPS and DPS of ~9% over this time period. Enbridge maintains an
A- corporate credit rating from S&P.
Growth—shooting for 10%+ EPS growth per year until 2012. Over the next several years, Enbridge is confident that its
sustainable growth initiatives will allow the company to realize an adjusted EPS CAGR of 10%+, slightly above its ~9% historical
growth rate, including growth of 12–25% in 2009, according to its latest guidance range of C$2.18–2.32 (compared with a range
of C$1.85–1.95 for 2008). As a result, the company announced a 12% increase to its quarterly dividend for 2009 to an
annualized C$1.48/share (up from C$1.32/share). This dividend increase follows Enbridge’s stated goal of maintaining a payout
ratio of 60–70% of adjusted EPS. EPS and DPS growth are likely to come from the company’s current C$10–15b worth of growth
projects that are expected to start operating between now and 2012. Longer term growth could follow in a ‘Second Wave’ of
prospects under development totalling more than C$15–20b of potential investment.
Financials, valuation and recommendation. We forecast EPS growth on the order of 11% pa for Enbridge over the next couple
of years, driven primarily by expansion to the company’s main crude oil transportation network. Given a
60–70% target earnings payout ratio, ENB should have no difficulty increasing its dividends, although DPS growth could lag EPS
growth if the company seeks to move toward the bottom of its target payout range. As all of Enbridge’s forecast growth is
expected to come from its regulated pipeline and gas distribution businesses, we do not expect a significant shift in its business
risk profile. As a result, we believe that an Average risk qualifier is appropriate for the company. Our C$42.75 12-month target
price is based upon a 17.5x P/E multiple applied to our 2010 EPS estimate of C$2.44. At a closing price of C$39.79 as of
January 26, 2009, our target price reflects a potential total return of 11.2%, inclusive of the C$1.48/share dividend announced by
ENB for 2009. Given our Average risk qualifier and the potential 12-month total return, we believe Enbridge’s shares deserve a
Hold rating. We are initiating coverage of Enbridge Inc. with a Hold–Average Risk rating and C$42.75 target price.