28. Capital Structure Financial Policies

The company's primary capital management strategy is to maintain a conservative balance sheet, which supports a solid investment grade credit rating profile. This objective affords the company the financial flexibility and access to the capital it requires to execute on its growth objectives.

The company's capital is primarily monitored by reviewing the ratios of net debt to funds from operations(1) and total debt to total debt plus shareholders' equity.

Net debt to funds from operations(1) is calculated as short-term debt plus total long-term debt less cash and cash equivalents, divided by funds from operations for the year then ended.

Total debt to total debt plus shareholders' equity is calculated as short-term debt plus total long-term debt divided by short-term debt plus total long-term debt plus shareholders' equity. This financial covenant under the company's various banking and debt agreements shall not be greater than 65%.

The company's financial covenant is reviewed regularly and controls are in place to maintain compliance with the covenant. The company complied with financial covenants for the years ended December 31, 2020 and 2019. The company's financial measures, as set out in the following schedule, were unchanged from 2019. The company believes that achieving its capital target helps to provide the company access to capital at a reasonable cost by maintaining solid investment grade credit ratings. The company operates in a fluctuating business environment and ratios may periodically fall outside of management's targets. Total debt to total debt plus shareholders' equity was 37.8% at December 31, 2020 and increased due to higher debt levels and lower shareholders' equity as a result of net losses, including impairment charges recorded during the year. The company addresses these fluctuations by capital expenditure reductions and sales of non-core assets to ensure net debt achieves management's targets.

($ millions)			Capital Measure Target	December 31 2020	December 31 2019

Components of ratios

	Short-term debt			3 566	2 155

	Current portion of long-term debt			1 413	—

	Current portion of long-term lease liabilities			272	310

	Long-term debt			13 812	12 884

	Long-term lease liabilities			2 636	2 621

		Total debt		21 699	17 970

	Less: Cash and cash equivalents			1 885	1 960

		Net debt		19 814	16 010

	Shareholders' equity			35 757	42 042

	Total capitalization (total debt plus shareholders' equity)			57 456	60 012

	Funds from operations(1)			3 876	10 818

Net debt to funds from operations			<3.0 times	5.1	1.5

Total debt to total debt plus shareholders' equity			20% – 35%	37.8%	29.9%


(1)	Funds from operations is calculated as cash flow from operating activities before changes in non-cash working capital, and is a non-GAAP financial measure.