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RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (Tables)
 12 Months Ended
Dec. 31, 2019
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, 2019
Derivative
Instruments
Used as
Cash Flow Hedges

Derivative
Instruments
Used as Net
Investment 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
—

—

161

161

 
(78
)
83

Commodity contracts
—

—

163

163

 
(47
)
116

Other contracts
1

—

3

4

 
—

4

 
1

—

327

328

1 
(125
)
203

Deferred amounts and other assets
 

 

 

 
 
 

 
Foreign exchange contracts
10

—

71

81

 
(42
)
39

Commodity contracts
—

—

17

17

 
(2
)
15

Other contracts
2

—

1

3

 
—

3

 
12

—

89

101

 
(44
)
57

Accounts payable and other
 

 

 

 
 
 

 
Foreign exchange contracts
(5
)
(13
)
(392
)
(410
)
 
78

(332
)
Interest rate contracts
(353
)
—

—

(353
)
 
—

(353
)
Commodity contracts
—

—

(173
)
(173
)
 
47

(126
)
 
(358
)
(13
)
(565
)
(936
)
2 
125

(811
)
Other long-term liabilities
 

 

 

 
 
 

 
Foreign exchange contracts
—

—

(934
)
(934
)
 
42

(892
)
Interest rate contracts
(181
)
—

—

(181
)
 
—

(181
)
Commodity contracts
(5
)
—

(60
)
(65
)
 
2

(63
)
 
(186
)
—

(994
)
(1,180
)
 
44

(1,136
)
Total net derivative asset/(liability)
 

 

 

 
 
 

 
Foreign exchange contracts
5

(13
)
(1,094
)
(1,102
)
 
—

(1,102
)
Interest rate contracts
(534
)
—

—

(534
)
 
—

(534
)
Commodity contracts
(5
)
—

(53
)
(58
)
 
—

(58
)
Other contracts
3

—

4

7

 
—

7

 
(531
)
(13
)
(1,143
)
(1,687
)
 
—

(1,687
)
1
Reported within Accounts receivable and other (2019 - $327 million; 2018 - $498 million) and Accounts receivable from affiliates (2019 - $1 million; 2018 - nil) on the Consolidated Statements of Financial Position.
2
Reported within Accounts payable and other (2019 - $920 million; 2018 - $1,234 million) and Accounts payable to affiliates (2019 - $16 million; 2018 - nil) on the Consolidated Statements of Financial Position.

December 31, 2018
Derivative
Instruments
Used as
Cash Flow Hedges

Derivative
Instruments
Used as Net Investment 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
)
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.
 
2019
 
 
 
2018

 
As at December 31,
2020

2021

2022

2023

2024

Thereafter

 
Total

 
Total

 
Foreign exchange contracts - United States dollar forwards - purchase (millions of United States dollars)
1,121

—

—

—

—

—

 
1,121

 
926

 
Foreign exchange contracts - United States dollar forwards - sell (millions of United States dollars)
5,631

4,946

5,182

1,804

1,856

—

 
19,419

 
19,075

 
Foreign exchange contracts - GBP forwards - sell (millions of GBP)
94

27

28

29

30

90

 
298

 
318

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

—

—

—

—

—

 
—

 
226

 
Foreign exchange contracts - Euro forwards - sell (millions of Euro)
23

94

94

92

91

515

 
909

 
909

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

—

72,500

—

—

—

 
72,500

 
52,662

 
Interest rate contracts - short-term pay fixed rate (millions of Canadian dollars)
6,090

4,090

400

48

35

121

 
10,784

 
19,664

 
Interest rate contracts - long-term pay fixed rate (millions of Canadian dollars)
3,533

1,569

—

—

—

—

 
5,102

 
8,558

 
Equity contracts (millions of Canadian dollars)
20

34

—

—

—

—

 
54

 
55

 
Commodity contracts - natural gas (billions of cubic feet)
(33
)
14

15

3

—

—

 
(1
)
 
(167
)
 
Commodity contracts - crude oil (millions of barrels)
28

—

—

—

—

—

 
28

 
4

 
Commodity contracts - NGL (millions of barrels)
2

—

—

—

—

—

 
2

 
—

 
Commodity contracts - power (megawatt per hour (MW/H)
80

(3
)
(43
)
(43
)
(43
)
(43
)
1 
(16
)
2 
(7
)
2 
1
As at December 31, 2019, thereafter includes an average net purchase/(sell) of power of (43) MW/H for 2025.
2
Total is an average net purchase/(sell) of power.
Schedule of effect of cash flow hedges and net investment hedges on consolidated earnings and consolidated comprehensive income, before income taxes
Year ended December 31,
2019

2018

(millions of Canadian dollars)
 
 
Unrealized gain on derivative
—

7

Unrealized gain on hedged item
—

1

Realized loss on derivative
—

(8
)
Realized loss on hedged item
—

(1
)


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:
 
2019

2018

2017

(millions of Canadian dollars)
 

 

 

Amount of unrealized gain/(loss) recognized in OCI
 

 

 

Cash flow hedges
 

 

 

Foreign exchange contracts
(19
)
19

(5
)
Interest rate contracts
(559
)
(190
)
6

Commodity contracts
(25
)
2

11

Other contracts
10

(3
)
1

Net investment hedges
 

 

 

Foreign exchange contracts
2

31

284

 
(591
)
(141
)
297

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

 

 

Foreign exchange contracts1
5

5

(104
)
Interest rate contracts2,3
157

184

384

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

8

 
158

191

279

1
Reported within Transportation and other services revenues and Net foreign currency gain/(loss) in the Consolidated Statements of Earnings.
2
Reported within Interest expense in the Consolidated Statements of Earnings. Effective January 1, 2019, hedge ineffectiveness will no longer be measured or recorded. See Note 2.
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 revenue, Commodity sales revenues, Commodity costs and Operating and administrative expense in the Consolidated Statements of Earnings.
5
Reported within Operating and administrative expenses 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:
Year ended December 31,
2019

2018

2017

(millions of Canadian dollars)
 

 

 

Foreign exchange contracts1
1,626

(1,390
)
1,284

Interest rate contracts2
178

5

157

Commodity contracts3
(62
)
485

(199
)
Other contracts4
9

(3
)
—

Total unrealized derivative fair value gain/(loss), net
1,751

(903
)
1,242

1
For the respective annual periods, reported within Transportation and other services revenue (2019 - $930 million gain; 2018 - $1,108 million loss; 2017 - $800 million gain) and Net foreign currency gain/(loss) (2019 - $696 million gain; 2018 - $282 million loss; 2017 - $484 million gain) in the Consolidated Statements of Earnings.
2
Reported as a decrease within Interest expense in the Consolidated Statements of Earnings.
3
For the respective annual periods, reported within Transportation and other services revenue (2019 - $26 million loss; 2018 - $66 million gain; 2017 - $104 million loss), Commodity sales (2019 - $544 million loss; 2018 - $599 million gain; 2017 - $90 million gain), Commodity costs (2019 - $459 million gain; 2018 - $193 million loss; 2017 - $223 million loss) and Operating and administrative expense (2019 - $49 million gain; 2018 - $13 million gain; 2017 - $38 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:
December 31,
2019

2018

(millions of Canadian dollars)
 

 

Canadian financial institutions
146

28

United States financial institutions
40

107

European financial institutions
3

84

Asian financial institutions
92

6

Other1
113

337

 
394

562

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, 2019
Level 1

Level 2

Level 3

Total Gross Derivative Instruments

(millions of Canadian dollars)
 

 

 

 

Financial assets
 

 

 

 

Current derivative assets
 

 

 

 

Foreign exchange contracts
—

161

—

161

Commodity contracts
—

33

130

163

Other contracts
—

4

—

4

 
—

198

130

328

Long-term derivative assets
 

 

 

 
Foreign exchange contracts
—

81

—

81

Commodity contracts
—

12

5

17

Other contracts
—

3

—

3

 
—

96

5

101

Financial liabilities
 

 

 

 
Current derivative liabilities
 

 

 

 
Foreign exchange contracts
—

(410
)
—

(410
)
Interest rate contracts
—

(353
)
—

(353
)
Commodity contracts
(5
)
(23
)
(145
)
(173
)
Other contracts
—

—

—

—

 
(5
)
(786
)
(145
)
(936
)
Long-term derivative liabilities
 

 

 

 
Foreign exchange contracts
—

(934
)
—

(934
)
Interest rate contracts
—

(181
)
—

(181
)
Commodity contracts
—

(6
)
(59
)
(65
)
Other contracts
—

—

—

—

 
—

(1,121
)
(59
)
(1,180
)
Total net financial asset/(liability)
 

 

 

 
Foreign exchange contracts
—

(1,102
)
—

(1,102
)
Interest rate contracts
—

(534
)
—

(534
)
Commodity contracts
(5
)
16

(69
)
(58
)
Other contracts
—

7

—

7

 
(5
)
(1,613
)
(69
)
(1,687
)
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
)
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, 2019
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
—

Forward gas price
1.95
4.88
3.04
$/mmbtu2
Crude
4

Forward crude price
44.24
82.29
52.76
$/barrel
NGL
3

Forward NGL price
0.54
0.86
0.82
$/gallon
Power
(61
)
Forward power price
27.84
71.79
57.46
$/MW/H 
Commodity contracts - physical1
 

 
 
 
 
 
Natural gas
28

Forward gas price
1.00
8.37
2.53
$/mmbtu2
Crude
(45
)
Forward crude price
40.20
90.75
70.27
$/barrel 
NGL
2

Forward NGL price
0.18
2.01
0.79
$/gallon 
 
(69
)
 
 
 
 
 
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,
2019

2018

(millions of Canadian dollars)
 

 

Level 3 net derivative liability at beginning of period
(11
)
(387
)
Total gain/(loss)
 

 

Included in earnings1
27

206

Included in OCI
(25
)
2

 Settlements
(60
)
168

Level 3 net derivative liability at end of period
(69
)
(11
)
1
Reported within Transportation and other services revenue, Commodity costs and Operating and administrative expenses in the Consolidated Statements of Earnings.