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RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (Tables)
 9 Months Ended
Sep. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Summary of the Consolidated Statements of Financial Position location and carrying value of derivative instruments
The following table summarizes the maximum potential settlement amounts in the event of these specific circumstances. All amounts are presented gross in the Consolidated Statements of Financial Position.

September 30, 2018
Derivative
Instruments
Used as
Cash Flow Hedges

Derivative
Instruments
Used as Net
Investment Hedges

Derivative
Instruments
Used as
Fair Value Hedges

Non-
Qualifying
Derivative Instruments

Total Gross
Derivative
Instruments as Presented

Amounts
Available for Offset

Total Net
Derivative Instruments

(millions of Canadian dollars)
 
 
 
 
 
 
 
Accounts receivable and other
 
 
 
 
 
 
 
Foreign exchange contracts
—

1

—

66

67

(49
)
18

Interest rate contracts
49

—

—

—

49

(3
)
46

Commodity contracts
1

—

—

119

120

(85
)
35

 
50

1

—

185

236

(137
)
99

Deferred amounts and other assets
 
 
 
 
 
 
 
Foreign exchange contracts
4

—

—

39

43

(29
)
14

Interest rate contracts
42

—

—

—

42

(1
)
41

Commodity contracts
18

—

—

12

30

(25
)
5

Other contracts
—

—

—

—

—

—

—

 
64

—

—

51

115

(55
)
60

Accounts payable and other
 
 
 
 
 
 
 
Foreign exchange contracts
(5
)
—

—

(371
)
(376
)
49

(327
)
Interest rate contracts
(50
)
—

(9
)
(179
)
(238
)
3

(235
)
Commodity contracts
—

—

—

(411
)
(411
)
85

(326
)
Other contracts
(1
)
—

—

(8
)
(9
)
—

(9
)
 
(56
)
—

(9
)
(969
)
(1,034
)
137

(897
)
Other long-term liabilities
 
 
 
 
 
 
 
Foreign exchange contracts
—

(11
)
—

(1,420
)
(1,431
)
29

(1,402
)
Interest rate contracts
(6
)
—

(3
)
—

(9
)
1

(8
)
Commodity contracts
—

—

—

(153
)
(153
)
25

(128
)
Other contracts
(3
)
—

—

(4
)
(7
)
—

(7
)
 
(9
)
(11
)
(3
)
(1,577
)
(1,600
)
55

(1,545
)
Total net derivative asset/(liability)
 
 
 
 
 
 
 
Foreign exchange contracts
(1
)
(10
)
—

(1,686
)
(1,697
)
—

(1,697
)
Interest rate contracts
35

—

(12
)
(179
)
(156
)
—

(156
)
Commodity contracts
19

—

—

(433
)
(414
)
—

(414
)
Other contracts
(4
)
—

—

(12
)
(16
)
—

(16
)
 
49

(10
)
(12
)
(2,310
)
(2,283
)
—

(2,283
)
 
December 31, 2017
Derivative
Instruments
Used as
Cash Flow Hedges

Derivative
Instruments
Used as Net
Investment Hedges

Derivative Instruments Used as Fair Value Hedges

Non-
Qualifying
Derivative Instruments

Total Gross
Derivative
Instruments as Presented

Amounts
Available for Offset

Total Net
Derivative Instruments

(millions of Canadian dollars)
 
 
 
 
 
 
 
Accounts receivable and other
 
 
 
 
 
 
 
Foreign exchange contracts
1

4

—

138

143

(83
)
60

Interest rate contracts
6

—

2

—

8

(3
)
5

Commodity contracts
2

—

—

143

145

(64
)
81

 
9

4

2

281

296

(150
)
146

Deferred amounts and other assets
 
 
2

 
 
 
 
Foreign exchange contracts
1

1

—

143

145

(125
)
20

Interest rate contracts
7

—

6

—

13

(2
)
11

Commodity contracts
17

—

—

6

23

(19
)
4

 
25

1

6

149

181

(146
)
35

Accounts payable and other
 
 
 
 
 
 
 
Foreign exchange contracts
(5
)
(42
)
—

(312
)
(359
)
83

(276
)
Interest rate contracts
(140
)
—

(6
)
(183
)
(329
)
3

(326
)
Commodity contracts
—

—

—

(439
)
(439
)
64

(375
)
Other contracts
(1
)
—

—

(2
)
(3
)
—

(3
)
 
(146
)
(42
)
(6
)
(936
)
(1,130
)
150

(980
)
Other long-term liabilities
 
 
 
 
 
 
 
Foreign exchange contracts
(4
)
(9
)
—

(1,299
)
(1,312
)
125

(1,187
)
Interest rate contracts
(38
)
—

(2
)
—

(40
)
2

(38
)
Commodity contracts
—

—

—

(186
)
(186
)
19

(167
)
Other contracts
(1
)
—

—

—

(1
)
—

(1
)
 
(43
)
(9
)
(2
)
(1,485
)
(1,539
)
146

(1,393
)
Total net derivative asset/(liability)
 
 
-2

 
 
 
 
Foreign exchange contracts
(7
)
(46
)
—

(1,330
)
(1,383
)
—

(1,383
)
Interest rate contracts
(165
)
—

—

(183
)
(348
)
—

(348
)
Commodity contracts
19

—

—

(476
)
(457
)
—

(457
)
Other contracts
(2
)
—

—

(2
)
(4
)
—

(4
)
 
(155
)
(46
)
—

(1,991
)
(2,192
)
—

(2,192
)
Summary of the maturity and notional principal or quantity outstanding related to derivative instruments
The following table summarizes the maturity and notional principal or quantity outstanding related to our derivative instruments.
September 30, 2018
2018

2019

2020

2021

2022

Thereafter1

Foreign exchange contracts - United States dollar forwards - purchase (millions of United States dollars)
591

3

1

—

—

—

Foreign exchange contracts - United States dollar forwards - sell (millions of United States dollars)
1,592

3,262

3,258

1,689

1,676

3,489

Foreign exchange contracts - British pound (GBP) forwards - sell (millions of GBP)
—

89

25

27

28

149

Foreign exchange contracts - Euro forwards - purchase (millions of Euro)
42

208

—

—

—

—

Foreign exchange contracts - Euro forwards - sell (millions of Euro)
—

—

23

94

94

698

Foreign exchange contracts - Japanese yen forwards - purchase (millions of yen)
—

32,662

—

—

20,000

—

Interest rate contracts - short-term pay fixed rate (millions of Canadian dollars)
1,251

3,590

1,093

121

93

203

Interest rate contracts - long-term receive fixed rate (millions of Canadian dollars)
145

582

555

188

102

—

Interest rate contracts - long-term debt pay fixed rate (millions of Canadian dollars)
1,894

600

573

—

—

—

Equity contracts (millions of Canadian dollars)
40

35

20

—

—

—

Commodity contracts - natural gas (billions of cubic feet)
(7
)
(58
)
(18
)
(5
)
8

1

Commodity contracts - crude oil (millions of barrels)
4

4

—

—

—

—

Commodity contracts - NGL (millions of barrels)
(1
)
—

—

—

—

—

Commodity contracts - power (megawatt per hour) (MW/H))
57

64

66

(3
)
(43
)
(43
)

1 As at September 30, 2018, thereafter includes an average net purchase/(sell) of power of (43) MW/H for 2023 through 2025.
Schedule of effect of cash flow hedges and net investment hedges on consolidated earnings and consolidated comprehensive income, before income taxes
The difference in the amounts, if any, represents hedge ineffectiveness.
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
2018

2017

 
2018

2017

(millions of Canadian dollars)
 
 
 
 
 
Unrealized gain/(loss) on derivative
3

—

 
(9
)
(1
)
Unrealized gain/(loss) on hedged item
(3
)
1

 
8

2

Realized gain/(loss) on derivative
(3
)
2

 
(4
)
2

Realized gain/(loss) on hedged item
3

(2
)
 
4

(2
)
The following table presents the effect of cash flow hedges and net investment hedges on our consolidated earnings and consolidated comprehensive income, before the effect of income taxes:
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
2018

2017

 
2018

2017

(millions of Canadian dollars)
 
 
 
 
 
Amount of unrealized gain/(loss) recognized in OCI
 
 
 
 
 
Cash flow hedges
 
 
 
 
 
Foreign exchange contracts
(16
)
(2
)
 
2

(1
)
Interest rate contracts
69

83

 
186

28

Commodity contracts
4

—

 
1

12

Other contracts
(10
)
16

 
(12
)
1

Net investment hedges
 
 
 
 
 
Foreign exchange contracts
25

148

 
36

221

 
72

245

 
213

261

Amount of (gain)/loss reclassified from AOCI to earnings (effective portion)
 
 
 
 
 
Foreign exchange contracts1
7

(3
)
 
4

(104
)
Interest rate contracts2
40

50

 
124

134

Commodity contracts3
—

—

 
(1
)
(4
)
Other contracts4
7

(11
)
 
10

2

 
54

36

 
137

28

Amount of (gain)/loss reclassified from AOCI to earnings (ineffective portion and amount excluded from effectiveness testing)
 
 
 
 
 
Interest rate contracts2
(2
)
(1
)
 
8

5

 
(2
)
(1
)
 
8

5

1
Reported within Transportation and other services revenues and Other income/(expense) in the Consolidated Statements of Earnings.
2
Reported within Interest expense in the Consolidated Statements of Earnings.
3
Reported within Transportation and other services revenues, Commodity sales revenues, Commodity costs and Operating and administrative expense in the Consolidated Statements of Earnings.
4
Reported within Operating and administrative expense in the Consolidated Statements of Earnings.
Schedule of unrealized gains and losses associated with changes in the fair value of non-qualifying derivatives
The following table presents the unrealized gains and losses associated with changes in the fair value of
our non-qualifying derivatives:
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
2018

2017

 
2018

2017

(millions of Canadian dollars)
 
 
 
 
 
Foreign exchange contracts1
345

503

 
(356
)
1,210

Interest rate contracts2
6

(1
)
 
4

13

Commodity contracts3
(113
)
(160
)
 
43

22

Other contracts4
(8
)
3

 
(10
)
(2
)
Total unrealized derivative fair value gain/(loss), net
230

345

 
(319
)
1,243

1
For the respective nine months ended periods, reported within Transportation and other services revenues (2018 - $346 million loss; 2017 - $726 million gain) and Other income/(expense) (2018 - $10 million loss; 2017 - $484 million gain) in the Consolidated Statements of Earnings.
2
Reported as an (increase)/decrease within Interest expense in the Consolidated Statements of Earnings.
3
For the respective nine months ended periods, reported within Transportation and other services revenues (2018 - $16 million loss; 2017 - $85 million loss), Commodity sales (2018 - $42 million loss; 2017 - $67 million gain), Commodity costs (2018 - $90 million gain; 2017 - $22 million gain) and Operating and administrative expense (2018 - $11 million gain; 2017 - $18 million gain) in the Consolidated Statements of Earnings.
4
Reported within Operating and administrative expense in the Consolidated Statements of Earnings.
Schedule of group credit concentrations and maximum credit exposure, with respect to derivative instruments
We have credit concentrations and credit exposure, with respect to derivative instruments, in the following counterparty segments:
 
September 30,
2018

December 31,
2017

(millions of Canadian dollars)
 
 
Canadian financial institutions
28

82

United States financial institutions
44

19

European financial institutions
79

145

Asian financial institutions
31

2

Other1
86

137

 
268

385

 
1
Other is comprised of commodity clearing house and physical natural gas and crude oil counterparties.
Schedule of derivative assets and liabilities measured at fair value
We have categorized our derivative assets and liabilities measured at fair value as follows:
September 30, 2018
Level 1

Level 2

Level 3

Total Gross
Derivative
Instruments

(millions of Canadian dollars)
 

 

 

 

Financial assets
 

 

 

 

Current derivative assets
 

 

 

 

Foreign exchange contracts
—

67

—

67

Interest rate contracts
—

49

—

49

Commodity contracts
1

9

110

120

 
1

125

110

236

Long-term derivative assets
 

 

 

 

Foreign exchange contracts
—

43

—

43

Interest rate contracts
—

42

—

42

Commodity contracts
—

5

25

30

Other contracts
—

—

—

—

 
—

90

25

115

Financial liabilities
 

 

 

 

Current derivative liabilities
 

 

 

 

Foreign exchange contracts
—

(376
)
—

(376
)
Interest rate contracts
—

(238
)
—

(238
)
Commodity contracts
(11
)
(37
)
(363
)
(411
)
Other contracts
—

(9
)
—

(9
)
 
(11
)
(660
)
(363
)
(1,034
)
Long-term derivative liabilities
 

 

 

 

Foreign exchange contracts
—

(1,431
)
—

(1,431
)
Interest rate contracts
—

(9
)
—

(9
)
Commodity contracts
—

(11
)
(142
)
(153
)
Other contracts
—

(7
)
—

(7
)
 
—

(1,458
)
(142
)
(1,600
)
Total net financial liabilities
 

 

 

 

Foreign exchange contracts
—

(1,697
)
—

(1,697
)
Interest rate contracts
—

(156
)
—

(156
)
Commodity contracts
(10
)
(34
)
(370
)
(414
)
Other contracts
—

(16
)
—

(16
)
 
(10
)
(1,903
)
(370
)
(2,283
)
December 31, 2017
Level 1

Level 2

Level 3

Total Gross
Derivative
Instruments

(millions of Canadian dollars)
 

 

 

 

Financial assets
 

 

 

 

Current derivative assets
 

 

 

 

Foreign exchange contracts
—

143

—

143

Interest rate contracts
—

8

—

8

Commodity contracts
1

30

114

145

 
1

181

114

296

Long-term derivative assets
 

 

 

 

Foreign exchange contracts
—

145

—

145

Interest rate contracts
—

13

—

13

Commodity contracts
—

2

21

23

 
—

160

21

181

Financial liabilities
 

 

 

 

Current derivative liabilities
 

 

 

 

Foreign exchange contracts
—

(359
)
—

(359
)
Interest rate contracts
—

(329
)
—

(329
)
Commodity contracts
(13
)
(87
)
(339
)
(439
)
Other contracts
—

(3
)
—

(3
)
 
(13
)
(778
)
(339
)
(1,130
)
Long-term derivative liabilities
 

 

 

 

Foreign exchange contracts
—

(1,312
)
—

(1,312
)
Interest rate contracts
—

(40
)
—

(40
)
Commodity contracts
—

(3
)
(183
)
(186
)
Other contracts
—

(1
)
—

(1
)
 
—

(1,356
)
(183
)
(1,539
)
Total net financial liabilities
 

 

 

 

Foreign exchange contracts
—

(1,383
)
—

(1,383
)
Interest rate contracts
—

(348
)
—

(348
)
Commodity contracts
(12
)
(58
)
(387
)
(457
)
Other contracts
—

(4
)
—

(4
)
 
(12
)
(1,793
)
(387
)
(2,192
)
Schedule of significant unobservable inputs used in the fair value measurement of Level 3 derivative instruments
The significant unobservable inputs used in the fair value measurement of Level 3 derivative instruments were as follows:
September 30, 2018
Fair
Value

Unobservable
Input
Minimum
Price

Maximum
Price

Weighted
Average Price

Unit of
Measurement
(fair value in millions of Canadian dollars)
 
 
 
 
 
 
Commodity contracts - financial1
 
 
 
 
 
 
Natural gas
(6
)
Forward gas price
2.34

4.93

3.36

$/mmbtu2
Crude
(38
)
Forward crude price
51.62

178.33

76.45

$/barrel
NGL
(2
)
Forward NGL price
1.39

1.67

1.58

$/gallon
Power
(93
)
Forward power price
26.01

72.42

47.74

$/MW/H
Commodity contracts - physical1
 
 
 
 
 
 
Natural gas
(83
)
Forward gas price
1.08

6.24

2.75

$/mmbtu2
Crude
(141
)
Forward crude price
29.79

123.22

81.29

$/barrel
NGL
(7
)
Forward NGL price
0.71

2.16

1.13

$/gallon
 
(370
)
 
 
 
 
 
1
Financial and physical forward commodity contracts are valued using a market approach valuation technique.
2
One million British thermal units (mmbtu).
Schedule of changes in net fair value of derivative assets and liabilities classified as Level 3 in the fair value hierarchy
Changes in net fair value of derivative assets and liabilities classified as Level 3 in the fair value hierarchy were as follows:
 
Nine months ended
September 30,
 
2018

2017

(millions of Canadian dollars)
 

 

Level 3 net derivative liability at beginning of period
(387
)
(295
)
Total gain/(loss)
 

 

Included in earnings1
(146
)
1

Included in OCI
—

11

Settlements
163

83

Level 3 net derivative liability at end of period
(370
)
(200
)
1
Reported within Transportation and other services revenues, Commodity costs and Operating and administrative expense in the Consolidated Statements of Earnings.