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RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (Tables)
 12 Months Ended
Dec. 31, 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.

December 31, 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
—

—

—

47

47

(37
)
10

Interest rate contracts
22

—

—

—

22

(2
)
20

Commodity contracts
2

—

—

427

429

(114
)
315

 
24

—

—

474

498

(153
)
345

Deferred amounts and other assets
 

 

 
 

 
 

 
Foreign exchange contracts
23

—

—

39

62

(39
)
23

Interest rate contracts
5

—

—

—

5

—

5

Commodity contracts
19

—

—

33

52

(21
)
31

 
47

—

—

72

119

(60
)
59

Accounts payable and other
 

 

 
 

 
 

 
Foreign exchange contracts
(5
)
—

—

(610
)
(615
)
37

(578
)
Interest rate contracts
(163
)
—

—

(178
)
(341
)
2

(339
)
Commodity contracts
—

—

—

(273
)
(273
)
114

(159
)
Other contracts
(1
)
—

—

(4
)
(5
)
—

(5
)
 
(169
)
—

—

(1,065
)
(1,234
)
153

(1,081
)
Other long-term liabilities
 

 

 
 

 
 

 
Foreign exchange contracts
(1
)
(15
)
—

(2,196
)
(2,212
)
39

(2,173
)
Interest rate contracts
(201
)
—

—

—

(201
)
—

(201
)
Commodity contracts
—

—

—

(178
)
(178
)
21

(157
)
Other contracts
(1
)
—

—

(1
)
(2
)
—

(2
)
 
(203
)
(15
)
—

(2,375
)
(2,593
)
60

(2,533
)
Total net derivative asset/(liability)
 

 

 
 

 
 

 
Foreign exchange contracts
17

(15
)
—

(2,720
)
(2,718
)
—

(2,718
)
Interest rate contracts
(337
)
—

—

(178
)
(515
)
—

(515
)
Commodity contracts
21

—

—

9

30

—

30

Other contracts
(2
)
—

—

(5
)
(7
)
—

(7
)
 
(301
)
(15
)
—

(2,894
)
(3,210
)
—

(3,210
)
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
 

 

 
 

 
 

 
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)
 

 



 

 
 

 
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. 
 
2018
 
2017

 
As at December 31,
2019

2020

2021

2022

2023

Thereafter

 
Total

 
Foreign exchange contracts - United States dollar forwards - purchase (millions of United States dollars)
925

1

—

—

—

—

 
759

 
Foreign exchange contracts - United States dollar forwards - sell (millions of United States dollars)
4,969

4,893

3,608

1,944

1,804

1,857

 
16,167

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

—

—

—

—

—

 
18

 
Foreign exchange contracts - GBP forwards - sell (millions of GBP)
89

25

27

28

29

120

 
318

 
Foreign exchange contracts - Euro forwards - purchase (millions of Euro)
226

—

—

—

—

—

 
655

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

23

94

94

92

606

 
1,262

 
Foreign exchange contracts - Japanese yen forwards - purchase (millions of yen)
32,662

—

—

20,000

—

—

 
52,662

 
Interest rate contracts - short-term pay fixed rate (millions of Canadian dollars)
8,616

6,243

4,188

412

49

156

 
7,138

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

—

—

—

—

—

 
4,196

 
Interest rate contracts - long-term pay fixed rate (millions of Canadian dollars)
3,777

3,185

1,596

—

—

—

 
5,402

 
Equity contracts (millions of Canadian dollars)
35

20

—

—

—

—

 
90

 
Commodity contracts - natural gas (billions of cubic feet)
(141
)
(16
)
(6
)
(4
)
—

—

 
(159
)
 
Commodity contracts - crude oil (millions of barrels)
4

—

—

—

—

—

 
(3
)
 
Commodity contracts - NGL (millions of barrels)
—

—

—

—

—

—

 
(12
)
 
Commodity contracts - power (megawatt per hour (MW/H))
64

66

(3
)
(43
)
(43
)
(43
)
1 
(43
)
2 
1
As at December 31, 2018, thereafter includes an average net purchase/(sell) of power of (43) MW/H for 2024 through 2025.
2
As at December 31, 2017, 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 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:
 
2018

2017

2016

(millions of Canadian dollars)
 

 

 

Amount of unrealized gain/(loss) recognized in OCI
 

 

 

Cash flow hedges
 

 

 

Foreign exchange contracts
19

(5
)
(19
)
Interest rate contracts
(190
)
6

(90
)
Commodity contracts
2

11

14

Other contracts
(3
)
1

39

Net investment hedges
 

 

 

Foreign exchange contracts
31

284

22

 
(141
)
297

(34
)
Amount of (gain)/loss reclassified from AOCI to earnings (effective portion)
 

 

 

Foreign exchange contracts1
5

(104
)
2

Interest rate contracts2,3
161

388

145

Commodity contracts4
(1
)
(9
)
(12
)
Other contracts5
3

8

(29
)
 
168

283

106

Amount of (gain)/loss reclassified from AOCI to earnings (ineffective portion and amount excluded from effectiveness testing)
 

 

 

Interest rate contracts2, 3
23

(4
)
61

 
23

(4
)
61

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
For the year ended December 31, 2017, includes settlements of $296 million loss related to the termination of long-term interest rate swaps as not highly probable to issue long-term debt.
4
Reported within Transportation and other services revenues, Commodity sales revenues, Commodity costs and Operating and administrative expense in the Consolidated Statements of Earnings.
5
Reported within Operating and administrative expense in the Consolidated Statements of Earnings.
Year ended December 31,
2018

2017

(millions of Canadian dollars)
 
 
Unrealized gain/(loss) on derivative
7

(10
)
Unrealized gain/(loss) on hedged item
1

11

Realized gain/(loss) on derivative
(8
)
2

Realized gain/(loss) on hedged item
(1
)
(2
)
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:
Year ended December 31,
2018

2017

2016

(millions of Canadian dollars)
 

 

 

Foreign exchange contracts1
(1,390
)
1,284

935

Interest rate contracts2
5

157

73

Commodity contracts3
485

(199
)
(508
)
Other contracts4
(3
)
—

9

Total unrealized derivative fair value gain/(loss), net
(903
)
1,242

509

1
For the respective annual periods, reported within Transportation and other services revenues (2018 - $1,108 million loss; 2017 - $800 million gain; 2016 - $497 million gain) and Other income/(expense) (2018 - $282 million loss; 2017 - $484 million gain; 2016 - $438 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 annual periods, reported within Transportation and other services revenues (2018 - $66 million gain; 2017 - $104 million loss; 2016 - $52 million loss), Commodity sales (2018 - $599 million gain; 2017 - $90 million gain; 2016 - $474 million loss), Commodity costs (2018 - $193 million loss; 2017 - $223 million loss; 2016 - $38 million gain) and Operating and administrative expense (2018 - $13 million gain; 2017 - $38 million gain; 2016 - $20 million loss) 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:
December 31,
2018

2017

(millions of Canadian dollars)
 

 

Canadian financial institutions
28

82

United States financial institutions
107

19

European financial institutions
84

145

Asian financial institutions
6

2

Other1
337

137

 
562

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:
December 31, 2018
Level 1

Level 2

Level 3

Total Gross Derivative Instruments

(millions of Canadian dollars)
 

 

 

 

Financial assets
 

 

 

 

Current derivative assets
 

 

 

 

Foreign exchange contracts
—

47

—

47

Interest rate contracts
—

22

—

22

Commodity contracts
24

45

360

429

 
24

114

360

498

Long-term derivative assets
 

 

 

 
Foreign exchange contracts
—

62

—

62

Interest rate contracts
—

5

—

5

Commodity contracts
—

30

22

52

 
—

97

22

119

Financial liabilities
 

 

 

 
Current derivative liabilities
 

 

 

 
Foreign exchange contracts
—

(615
)
—

(615
)
Interest rate contracts
—

(341
)
—

(341
)
Commodity contracts
(7
)
(28
)
(238
)
(273
)
Other contracts
—

(5
)
—

(5
)
 
(7
)
(989
)
(238
)
(1,234
)
Long-term derivative liabilities
 

 

 

 
Foreign exchange contracts
—

(2,212
)
—

(2,212
)
Interest rate contracts
—

(201
)
—

(201
)
Commodity contracts
—

(23
)
(155
)
(178
)
Other contracts
—

(2
)
—

(2
)
 
—

(2,438
)
(155
)
(2,593
)
Total net financial asset/(liability)
 

 

 

 
Foreign exchange contracts
—

(2,718
)
—

(2,718
)
Interest rate contracts
—

(515
)
—

(515
)
Commodity contracts
17

24

(11
)
30

Other contracts
—

(7
)
—

(7
)
 
17

(3,216
)
(11
)
(3,210
)
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 asset/(liability)
 

 

 

 
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:
December 31, 2018
Fair Value

Unobservable Input
Minimum Price/Volatility

Maximum Price/Volatility

Weighted Average Price/Volatility

Unit of Measurement
(fair value in millions of Canadian dollars)
 

 
 

 

 

 
Commodity contracts - financial1
 

 
 

 

 

 
Natural gas
(9
)
Forward gas price
2.54

6.37

3.58

$/mmbtu3
Crude
28

Forward crude price
27.50

123.20

59.32

$/barrel
NGL
—

Forward NGL price
—

—

—

$/gallon
Power
(91
)
Forward power price
16.21

96.72

48.33

$/MW/H 
Commodity contracts - physical1
 

 
 

 

 

 
Natural gas
(119
)
Forward gas price
1.09

6.95

1.51

$/mmbtu3
Crude
186

Forward crude price
16.45

123.22

59.22

$/barrel 
NGL
(6
)
Forward NGL price
0.13

1.40

0.59

$/gallon 
 
(11
)
 
 

 

 

 
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:
Year ended December 31,
2018

2017

(millions of Canadian dollars)
 

 

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

 

Included in earnings1
206

(184
)
Included in OCI
2

4

 Settlements
168

88

Level 3 net derivative liability at end of period
(11
)
(387
)
1
Reported within Transportation and other services revenues, Commodity costs and Operating and administrative expense in the Consolidated Statements of Earnings.