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RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (Tables)
 6 Months Ended
Jun. 30, 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.

June 30, 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
—

—

18

55

73

 
(36
)
37

Commodity contracts
1

—

—

276

277

 
(152
)
125

 
1

—

18

331

350

1 
(188
)
162

Deferred amounts and other assets
 
 
 
 
 
 
 
 
Foreign exchange contracts
18

—

69

158

245

 
(112
)
133

Commodity contracts
1

—

—

62

63

 
(23
)
40

 
19

—

69

220

308

 
(135
)
173

Accounts payable and other
 
 
 
 
 
 
 
 
Foreign exchange contracts
(5
)
(17
)
(2
)
(540
)
(564
)
 
36

(528
)
Interest rate contracts
(832
)
—

—

(15
)
(847
)
 
—

(847
)
Commodity contracts
—

—

—

(344
)
(344
)
 
152

(192
)
Other Contracts
—

—

—

(1
)
(1
)
 
—

(1
)
 
(837
)
(17
)
(2
)
(900
)
(1,756
)
2 
188

(1,568
)
Other long-term liabilities
 
 
 
 
 
 
 
 
Foreign exchange contracts
—

—

—

(1,524
)
(1,524
)
 
112

(1,412
)
Interest rate contracts
(390
)
—

—

—

(390
)
 
—

(390
)
Commodity contracts
—

—

—

(80
)
(80
)
 
23

(57
)
Other contracts
(3
)
—

—

(3
)
(6
)
 
—

(6
)
 
(393
)
—

—

(1,607
)
(2,000
)
 
135

(1,865
)
Total net derivative assets/(liabilities)
 
 
 
 
 
 
 
 
Foreign exchange contracts
13

(17
)
85

(1,851
)
(1,770
)
 
—

(1,770
)
Interest rate contracts
(1,222
)
—

—

(15
)
(1,237
)
 
—

(1,237
)
Commodity contracts
2

—

—

(86
)
(84
)
 
—

(84
)
Other contracts
(3
)
—

—

(4
)
(7
)
 
—

(7
)
 
(1,210
)
(17
)
85

(1,956
)
(3,098
)
 
—

(3,098
)
1
As at June 30, 2020, $349 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 June 30, 2020, $1,745 million was reported within Accounts payable and other and $11 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.
 
 
 
 
 
 
 
 
 
 
June 30, 2020
2020

2021

2022

2023

2024

Thereafter

 
Total

 
Foreign exchange contracts - United States dollar forwards - purchase (millions of United States dollars)
973

500

1,750

—

—

—

 
3,223

 
Foreign exchange contracts - United States dollar forwards - sell (millions of United States dollars)
3,027

5,631

5,703

3,784

1,856

—

 
20,001

 
Foreign exchange contracts - British pound (GBP) forwards - sell (millions of GBP)
76

27

28

29

30

90

 
280

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

94

94

92

90

515

 
908

 
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)
2,984

4,190

411

49

35

121

 
7,790

 
Interest rate contracts - long-term debt pay fixed rate (millions of Canadian dollars)
3,452

1,595

—

—

—

—

 
5,047

 
Equity contracts (millions of Canadian dollars)
16

34

—

—

—

—

 
50

 
Commodity contracts - natural gas (billions of cubic feet)3
45

55

22

17

10

11

 
160

 
Commodity contracts - crude oil (millions of barrels)3
8

9

1

—

—

—

 
18

 
Commodity contracts - power (megawatt per hour) (MW/H)
70

(3
)
(43
)
(43
)
(43
)
(43
)
1 
(18
)
2 
1
As at June 30, 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.
3 Total is a net purchase/(sell) of underlying commodity.
Schedule of effect of cash flow hedges and net investment hedges on consolidated earnings and consolidated comprehensive income, before income taxes
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
June 30,
 
Six months ended
June 30,
 
2020

2019

 
2020

2019

(millions of Canadian dollars)
 
 
 
 
 
Unrealized gain/(loss) on derivative
(133
)
—

 
85

—

Unrealized gain/(loss) on hedged item
138

—

 
(65
)
—

Realized loss on derivative
—

—

 
(12
)
—



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
June 30,
 
Six months ended
June 30,
 
2020

2019

 
2020

2019

(millions of Canadian dollars)
 
 
 
 
 
Amount of unrealized gain/(loss) recognized in OCI
 
 
 
 
 
Cash flow hedges
 
 
 
 
 
Foreign exchange contracts
(13
)
(3
)
 
6

(13
)
Interest rate contracts
(35
)
(285
)
 
(750
)
(581
)
Commodity contracts
—

(18
)
 
9

(21
)
Other contracts
1

2

 
(6
)
5

Fair value hedges
 
 
 
 
 
Foreign exchange contracts
5

—

 
8

—

Net investment hedges
 
 
 
 
 
Foreign exchange contracts
3

1

 
(4
)
2

 
(39
)
(303
)
 
(737
)
(608
)
Amount of (gain)/loss reclassified from AOCI to earnings
 
 
 
 
 
Foreign exchange contracts1
1

—

 
2

2

Interest rate contracts2
59

40

 
103

72

Other contracts3
—

6

 
—

(3
)
 
60

46

 
105

71

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.
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
June 30,
 
Six months ended
June 30,
 
2020

2019

 
2020

2019

(millions of Canadian dollars)
 
 
 
 
 
Foreign exchange contracts1
1,246

412

 
(757
)
1,028

Interest rate contracts2
3

—

 
(15
)
178

Commodity contracts3
(517
)
162

 
(44
)
(99
)
Other contracts4
—

—

 
(8
)
5

Total unrealized derivative fair value gain/(loss), net
732

574

 
(824
)
1,112


1
For the respective six months ended periods, reported within Transportation and other services revenues (2020 - $437 million loss; 2019 - $550 million gain) and Net foreign currency gain/(loss) (2020 - $320 million loss; 2019 - $478 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 six months ended periods, reported within Transportation and other services revenues (2020 - $17 million gain; 2019 - $25 million loss), Commodity sales (2020 - $403 million loss; 2019 - $490 million loss), Commodity costs (2020 - $348 million gain; 2019 - $392 million gain) and Operating and administrative expense (2020 - $6 million loss; 2019 - $24 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:
 
June 30,
2020

December 31,
2019

(millions of Canadian dollars)
 
 
Canadian financial institutions
125

146

United States financial institutions
127

40

European financial institutions
34

3

Asian financial institutions
135

92

Other1
218

113

 
639

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:
June 30, 2020
Level 1

Level 2

Level 3

Total Gross
Derivative
Instruments

(millions of Canadian dollars)
 

 

 

 

Financial assets
 

 

 

 

Current derivative assets
 

 

 

 

Foreign exchange contracts
—

73

—

73

Commodity contracts
15

47

215

277

 
15

120

215

350

Long-term derivative assets
 

 

 

 

Foreign exchange contracts
—

245

—

245

Commodity contracts
21

27

15

63

 
21

272

15

308

Financial liabilities
 

 

 

 

Current derivative liabilities
 

 

 

 

Foreign exchange contracts
—

(564
)
—

(564
)
Interest rate contracts
—

(847
)
—

(847
)
Commodity contracts
(29
)
(16
)
(299
)
(344
)
Other contracts
—

(1
)
—

(1
)
 
(29
)
(1,428
)
(299
)
(1,756
)
Long-term derivative liabilities
 

 

 

 

Foreign exchange contracts
—

(1,524
)
—

(1,524
)
Interest rate contracts
—

(390
)
—

(390
)
Commodity contracts
(12
)
(9
)
(59
)
(80
)
Other contracts
—

(6
)
—

(6
)
 
(12
)
(1,929
)
(59
)
(2,000
)
Total net financial assets/(liabilities)
 

 

 

 

Foreign exchange contracts
—

(1,770
)
—

(1,770
)
Interest rate contracts
—

(1,237
)
—

(1,237
)
Commodity contracts
(5
)
49

(128
)
(84
)
Other contracts
—

(7
)
—

(7
)
 
(5
)
(2,965
)
(128
)
(3,098
)

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:
June 30, 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
(7
)
Forward gas price
1.96

5.24

3.22

$/mmbtu2
Crude
16

Forward crude price
23.00

54.36

41.31

$/barrel
Power
(56
)
Forward power price
21.00

67.14

52.62

$/MW/H
Commodity contracts - physical1
 
 
 
 
 
 
Natural gas
17

Forward gas price
1.43

6.84

2.88

$/mmbtu2
Crude
(99
)
Forward crude price
33.45

74.06

50.63

$/barrel
NGL
1

Forward NGL price
0.19

1.29

0.57

$/gallon
 
(128
)
 
 
 
 
 
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:
 
Six months ended
June 30,
 
2020

2019

(millions of Canadian dollars)
 

 

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

 

Included in earnings1
(107
)
103

Included in OCI
7

(20
)
Settlements
41

(174
)
Level 3 net derivative liability at end of period
(128
)
(102
)
1
Reported within Transportation and other services revenues, Commodity costs and Operating and administrative expense in the Consolidated Statements of Earnings.