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RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (Tables)
 3 Months Ended
Mar. 31, 2020
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.



March 31, 2020
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
—

—

49

56

105

 
(50
)
55

Commodity contracts
2

—

—

961

963

 
(289
)
674

 
2

—

49

1,017

1,068

1 
(339
)
729

Deferred amounts and other assets
 
 
 
 
 
 
 
 
Foreign exchange contracts
30

—

169

174

373

 
(128
)
245

Commodity contracts
3

—

—

65

68

 
(22
)
46

 
33

—

169

239

441

 
(150
)
291

Accounts payable and other
 
 
 
 
 
 
 
 
Foreign exchange contracts
(5
)
(20
)
—

(899
)
(924
)
 
50

(874
)
Interest rate contracts
(813
)
—

—

(18
)
(831
)
 
—

(831
)
Commodity contracts
—

—

—

(506
)
(506
)
 
289

(217
)
Other Contracts
—

—

—

(1
)
(1
)
 
—

(1
)
 
(818
)
(20
)
—

(1,424
)
(2,262
)
2 
339

(1,923
)
Other long-term liabilities
 
 
 
 
 
 
 
 
Foreign exchange contracts
—

—

—

(2,428
)
(2,428
)
 
128

(2,300
)
Interest rate contracts
(395
)
—

—

—

(395
)
 
—

(395
)
Commodity contracts
—

—

—

(81
)
(81
)
 
22

(59
)
Other contracts
(4
)
—

—

(3
)
(7
)
 
—

(7
)
 
(399
)
—

—

(2,512
)
(2,911
)
 
150

(2,761
)
Total net derivative assets/(liabilities)
 
 
 
 
 
 
 
 
Foreign exchange contracts
25

(20
)
218

(3,097
)
(2,874
)
 
—

(2,874
)
Interest rate contracts
(1,208
)
—

—

(18
)
(1,226
)
 
—

(1,226
)
Commodity contracts
5

—

—

439

444

 
—

444

Other contracts
(4
)
—

—

(4
)
(8
)
 
—

(8
)
 
(1,182
)
(20
)
218

(2,680
)
(3,664
)
 
—

(3,664
)
1
As at March 31, 2020, $1,067 million was reported within Accounts receivable and other and $1 million within Accounts receivable from affiliates on the Consolidated Statements of Financial Position.
2
As at March 31, 2020, $2,246 million was reported within Accounts payable and other and $16 million within Accounts payable to affiliates on 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 assets/(liabilities)
 
 
 
 
 
 
 
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
As at December 31, 2019, $327 million was reported within Accounts receivable and other and $1 million within Accounts receivable from affiliates on the Consolidated Statements of Financial Position.
2
As at December 31, 2019, $920 million was reported within Accounts payable and other and $16 million within Accounts payable to affiliates on the Consolidated Statements of Financial Position.
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.
 
 
 
 
 
 
 
 
 
 
March 31, 2020
2020

2021

2022

2023

2024

Thereafter

 
Total

 
Foreign exchange contracts - United States dollar forwards - purchase (millions of United States dollars)
823

500

1,750

—

—

—

 
3,073

 
Foreign exchange contracts - United States dollar forwards - sell (millions of United States dollars)
4,416

5,631

5,703

3,784

1,856

—

 
21,390

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

27

28

29

30

90

 
293

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

94

94

92

91

515

 
909

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

—

72,500

—

—

—

 
72,500

 
Interest rate contracts - short-term pay fixed rate (millions of Canadian dollars)
4,618

4,284

422

50

36

121

 
9,531

 
Interest rate contracts - long-term debt pay fixed rate (millions of Canadian dollars)
3,544

1,619

—

—

—

—

 
5,163

 
Equity contracts (millions of Canadian dollars)
16

34

—

—

—

—

 
50

 
Commodity contracts - natural gas (billions of cubic feet)
(38
)
57

45

22

10

11

 
107

 
Commodity contracts - crude oil (millions of barrels)
5

4

1

—

—

—

 
10

 
Commodity contracts - power (megawatt per hour) (MW/H)
79

(3
)
(43
)
(43
)
(43
)
(43
)
1 
(16
)
2 
1
As at March 31, 2020, 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
The following table presents the effect of cash flow hedges, fair value hedges and net investment hedges on our consolidated earnings and consolidated comprehensive income, before the effect of income taxes:
 
Three months ended
March 31,
 
2020

2019

(millions of Canadian dollars)
 
 
Amount of unrealized gain/(loss) recognized in OCI
 
 
Cash flow hedges
 
 
Foreign exchange contracts
19

(10
)
Interest rate contracts
(715
)
(296
)
Commodity contracts
9

(3
)
Other contracts
(7
)
12

Fair value hedges
 
 
Foreign exchange contracts
3

—

Net investment hedges
 
 
Foreign exchange contracts
(7
)
1

 
(698
)
(296
)
Amount of (gain)/loss reclassified from AOCI to earnings
 
 
Foreign exchange contracts1
1

2

Interest rate contracts2
43

32

Other contracts3
—

(9
)
 
44

25

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.
3
Reported within Operating and administrative expense in the Consolidated Statements of Earnings.

For foreign exchange derivative instruments that are designated and qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk is included in Net foreign currency gain/(loss) in the Consolidated Statements of Earnings. Any excluded components are included in the Statements of Comprehensive Income.

 
Three months ended
March 31,
 
2020

2019

(millions of Canadian dollars)
 
 
Unrealized gain on derivative
218

—

Unrealized loss on hedged item
(203
)
—

Realized loss on derivative
(12
)
—
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
March 31,
 
2020

2019

(millions of Canadian dollars)
 
 
Foreign exchange contracts1
(2,003
)
616

Interest rate contracts2
(18
)
178

Commodity contracts3
473

(261
)
Other contracts4
(8
)
5

Total unrealized derivative fair value gain/(loss), net
(1,556
)
538


1
For the respective three months ended periods, reported within Transportation and other services revenues (2020 - $1,061 million loss; 2019 - $352 million gain) and Net foreign currency gain/(loss) (2020 - $942 million loss; 2019 - $264 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 three months ended periods, reported within Transportation and other services revenues (2020 - $34 million gain; 2019 - $26 million loss), Commodity sales (2020 - $1,493 million gain; 2019 - $642 million loss), Commodity costs (2020 - $1,045 million loss; 2019 - $398 million gain) and Operating and administrative expense (2020 - $9 million loss; 2019 - $9 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:
 
March 31,
2020

December 31,
2019

(millions of Canadian dollars)
 
 
Canadian financial institutions
128

146

United States financial institutions
310

40

European financial institutions
165

3

Asian financial institutions
76

92

Other1
798

113

 
1,477

394


 
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:
March 31, 2020
Level 1

Level 2

Level 3

Total Gross
Derivative
Instruments

(millions of Canadian dollars)
 

 

 

 

Financial assets
 

 

 

 

Current derivative assets
 

 

 

 

Foreign exchange contracts
—

105

—

105

Commodity contracts
90

73

800

963

 
90

178

800

1,068

Long-term derivative assets
 

 

 

 

Foreign exchange contracts
—

373

—

373

Commodity contracts
33

19

16

68

 
33

392

16

441

Financial liabilities
 

 

 

 

Current derivative liabilities
 

 

 

 

Foreign exchange contracts
—

(924
)
—

(924
)
Interest rate contracts
—

(831
)
—

(831
)
Commodity contracts
(58
)
(20
)
(428
)
(506
)
Other contracts
—

(1
)
—

(1
)
 
(58
)
(1,776
)
(428
)
(2,262
)
Long-term derivative liabilities
 

 

 

 

Foreign exchange contracts
—

(2,428
)
—

(2,428
)
Interest rate contracts
—

(395
)
—

(395
)
Commodity contracts
(13
)
(8
)
(60
)
(81
)
Other contracts
—

(7
)
—

(7
)
 
(13
)
(2,838
)
(60
)
(2,911
)
Total net financial assets/(liabilities)
 

 

 

 

Foreign exchange contracts
—

(2,874
)
—

(2,874
)
Interest rate contracts
—

(1,226
)
—

(1,226
)
Commodity contracts
52

64

328

444

Other contracts
—

(8
)
—

(8
)
 
52

(4,044
)
328

(3,664
)

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

 

 

 

Foreign exchange contracts
—

(934
)
—

(934
)
Interest rate contracts
—

(181
)
—

(181
)
Commodity contracts
—

(6
)
(59
)
(65
)
 
—

(1,121
)
(59
)
(1,180
)
Total net financial assets/(liabilities)
 

 

 

 

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
)
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:
March 31, 2020
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
(4
)
Forward gas price
1.81

5.15

3.18

$/mmbtu2
Crude
11

Forward crude price
4.46

96.53

46.61

$/barrel
Power
(57
)
Forward power price
21.00

70.42

53.00

$/MW/H
Commodity contracts - physical1
 
 
 
 
 
 
Natural gas
36

Forward gas price
1.51

7.53

2.56

$/mmbtu2
Crude
336

Forward crude price
7.00

76.89

28.24

$/barrel
NGL
6

Forward NGL price
0.11

1.20

0.42

$/gallon
 
328

 
 
 
 
 
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:
 
Three months ended
March 31,
 
2020

2019

(millions of Canadian dollars)
 

 

Level 3 net derivative liability at beginning of period
(69
)
(11
)
Total gain/(loss)
 

 

Included in earnings1
349

(52
)
Included in OCI
9

(3
)
Settlements
39

(156
)
Level 3 net derivative liability at end of period
328

(222
)
1
Reported within Transportation and other services revenues, Commodity costs and Operating and administrative expense in the Consolidated Statements of Earnings.