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RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2021

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, 2021	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	—	—	—	225	225	(31)	194

Commodity contracts	—	—	—	320	320	(278)	42
Other contracts	1	—	—	7	8	—	8
	1	—	—	552	553	(309)	244
Deferred amounts and other assets
Foreign exchange contracts	—	—	—	248	248	(86)	162
Interest rate contracts	168	—	—	—	168	(25)	143
Commodity contracts	—	—	—	83	83	(61)	22
Other contracts	1	—	—	2	3	—	3
	169	—	—	333	502	(172)	330
Accounts payable and other
Foreign exchange contracts	(8)	—	(105)	(148)	(261)	31	(230)
Interest rate contracts	(37)	—	—	2	(35)	—	(35)
Commodity contracts	(14)	—	—	(535)	(549)	278	(271)

	(59)	—	(105)	(681)	(845)	309	(536)
Other long-term liabilities
Foreign exchange contracts	—	—	—	(499)	(499)	86	(413)
Interest rate contracts	(115)	—	—	(23)	(138)	25	(113)
Commodity contracts	(18)	—	—	(131)	(149)	61	(88)

	(133)	—	—	(653)	(786)	172	(614)
Total net derivative assets/(liabilities)
Foreign exchange contracts	(8)	—	(105)	(174)	(287)	—	(287)
Interest rate contracts	16	—	—	(21)	(5)	—	(5)
Commodity contracts	(32)	—	—	(263)	(295)	—	(295)
Other contracts	2	—	—	9	11	—	11
	(22)	—	(105)	(449)	(576)	—	(576)


December 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	—	—	—	180	180	(28)	152

Commodity contracts	—	—	—	143	143	(81)	62

	—	—	—	323	323	(109)	214
Deferred amounts and other assets
Foreign exchange contracts	14	—	—	452	466	(218)	248
Interest rate contracts	56	—	—	—	56	(25)	31
Commodity contracts	—	—	—	39	39	(9)	30

	70	—	—	491	561	(252)	309
Accounts payable and other
Foreign exchange contracts	(5)	—	(29)	(151)	(185)	28	(157)
Interest rate contracts	(423)	—	—	(2)	(425)	—	(425)
Commodity contracts	(2)	—	—	(278)	(280)	81	(199)
Other contracts	(1)	—	—	(3)	(4)	—	(4)
	(431)	—	(29)	(434)	(894)	109	(785)
Other long-term liabilities
Foreign exchange contracts	—	—	(87)	(673)	(760)	218	(542)
Interest rate contracts	(218)	—	—	(23)	(241)	25	(216)
Commodity contracts	(1)	—	—	(57)	(58)	9	(49)

	(219)	—	(87)	(753)	(1,059)	252	(807)
Total net derivative assets/(liabilities)
Foreign exchange contracts	9	—	(116)	(192)	(299)	—	(299)
Interest rate contracts	(585)	—	—	(25)	(610)	—	(610)
Commodity contracts	(3)	—	—	(153)	(156)	—	(156)
Other contracts	(1)	—	—	(3)	(4)	—	(4)
	(580)	—	(116)	(373)	(1,069)	—	(1,069)

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, 2021	2021	2022	2023	2024	2025	Thereafter	Total
Foreign exchange contracts - US dollar forwards - purchase (millions of US dollars)	1,357	1,750	—	—	—	—	3,107
Foreign exchange contracts - US dollar forwards - sell (millions of US dollars)	2,210	6,354	3,784	2,480	1,290	672	16,790
Foreign exchange contracts - British pound (GBP) forwards - sell (millions of GBP)	62	28	29	30	30	60	239

Foreign exchange contracts - Euro forwards - sell (millions of Euro)	38	94	92	91	86	428	829
Foreign exchange contracts - Japanese yen forwards - purchase (millions of yen)	—	72,500	—	—	—	—	72,500
Interest rate contracts - short-term debt pay fixed rate (millions of Canadian dollars)	992	395	47	35	30	90	1,589
Interest rate contracts - long-term debt pay fixed rate (millions of Canadian dollars)	—	1,987	1,333	—	—	—	3,320
Equity contracts (millions of Canadian dollars)	40	19	26	20	—	—	105
Commodity contracts - natural gas (billions of cubic feet)2	19	55	15	4	10	(16)	87
Commodity contracts - crude oil (millions of barrels)2	12	2	—	—	—	—	14

Commodity contracts - power (megawatt per hour) (MW/H)	(18)	(43)	(43)	(43)	(43)	—	(42)	1

1 Total is an average net purchase/(sale) of power.

2 Total is a net purchase/(sale) 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 Consolidated Statements of Comprehensive Income.


	Three months ended September 30,		Nine months ended September 30,
	2021	2020	2021	2020
(millions of Canadian dollars)
Unrealized gain/(loss) on derivative	50	(60)	15	25
Unrealized gain/(loss) on hedged item	(50)	59	(22)	(6)
Realized loss on derivative	(1)	—	(40)	(12)
Realized gain on hedged item	—	—	45	—

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 September 30,		Nine months ended September 30,
	2021	2020	2021	2020
(millions of Canadian dollars)
Amount of unrealized gain/(loss) recognized in OCI
Cash flow hedges
Foreign exchange contracts	4	—	(21)	6
Interest rate contracts	(1)	41	293	(709)
Commodity contracts	(21)	(1)	(25)	8
Other contracts	(2)	—	2	(6)
Fair value hedges
Foreign exchange contracts	(1)	(1)	(3)	7
Net investment hedges
Foreign exchange contracts	—	17	—	13
	(21)	56	246	(681)
Amount of (gain)/loss reclassified from AOCI to earnings
Foreign exchange contracts1	1	1	4	3
Interest rate contracts2	76	76	218	179
Commodity contracts	(4)	(1)	(4)	(1)
Other contracts3	—	(1)	1	(1)
	73	75	219	180

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 September 30,		Nine months ended September 30,
	2021	2020	2021	2020
(millions of Canadian dollars)
Foreign exchange contracts1	(436)	571	18	(186)
Interest rate contracts2	2	(13)	4	(28)
Commodity contracts3	(102)	69	(120)	25
Other contracts4	2	(3)	12	(11)
Total unrealized derivative fair value gain/(loss), net	(534)	624	(86)	(200)

1 For the respective nine months ended periods, reported within Transportation and other services revenues (2021 - $71 million gain; 2020 - $87 million loss) and Net foreign currency gain/(loss) (2021 - $53 million loss; 2020 - $99 million loss) 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 (2021 - nil; 2020 - $8 million gain), Commodity sales (2021 - $5 million loss; 2020 - $176 million loss), Commodity costs (2021 - $124 million loss; 2020 - $195 million gain) and Operating and administrative expense (2021 - $8 million gain; 2020 - $2 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:


	September 30, 2021	December 31, 2020
(millions of Canadian dollars)
Canadian financial institutions	471	481
US financial institutions	240	99
European financial institutions	176	28
Asian financial institutions	24	167
Other1	124	97
	1,035	872

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, 2021	Level 1	Level 2	Level 3	Total Gross Derivative Instruments
(millions of Canadian dollars)
Financial assets
Current derivative assets
Foreign exchange contracts	—	225	—	225

Commodity contracts	129	150	41	320
Other contracts	—	8	—	8
	129	383	41	553
Long-term derivative assets
Foreign exchange contracts	—	248	—	248
Interest rate contracts	—	168	—	168
Commodity contracts	32	46	5	83
Other contracts	—	3	—	3
	32	465	5	502
Financial liabilities
Current derivative liabilities
Foreign exchange contracts	—	(261)	—	(261)
Interest rate contracts	—	(35)	—	(35)
Commodity contracts	(149)	(200)	(200)	(549)

	(149)	(496)	(200)	(845)
Long-term derivative liabilities
Foreign exchange contracts	—	(499)	—	(499)
Interest rate contracts	—	(138)	—	(138)
Commodity contracts	(35)	(34)	(80)	(149)

	(35)	(671)	(80)	(786)
Total net financial assets/(liabilities)
Foreign exchange contracts	—	(287)	—	(287)
Interest rate contracts	—	(5)	—	(5)
Commodity contracts	(23)	(38)	(234)	(295)
Other contracts	—	11	—	11
	(23)	(319)	(234)	(576)


December 31, 2020	Level 1	Level 2	Level 3	Total Gross Derivative Instruments
(millions of Canadian dollars)
Financial assets
Current derivative assets
Foreign exchange contracts	—	180	—	180

Commodity contracts	43	33	67	143
	43	213	67	323
Long-term derivative assets
Foreign exchange contracts	—	466	—	466
Interest rate contracts	—	56	—	56
Commodity contracts	1	24	14	39
	1	546	14	561
Financial liabilities
Current derivative liabilities
Foreign exchange contracts	—	(185)	—	(185)
Interest rate contracts	—	(425)	—	(425)
Commodity contracts	(39)	(18)	(223)	(280)
Other contracts	—	(4)	—	(4)
	(39)	(632)	(223)	(894)
Long-term derivative liabilities
Foreign exchange contracts	—	(760)	—	(760)
Interest rate contracts	—	(241)	—	(241)
Commodity contracts	(1)	(8)	(49)	(58)
	(1)	(1,009)	(49)	(1,059)
Total net financial assets/(liabilities)
Foreign exchange contracts	—	(299)	—	(299)
Interest rate contracts	—	(610)	—	(610)
Commodity contracts	4	31	(191)	(156)
Other contracts	—	(4)	—	(4)
	4	(882)	(191)	(1,069)

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, 2021	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	(20)	Forward gas price	3.34	9.66	4.95	$/mmbtu2
Crude	(2)	Forward crude price	68.14	94.91	81.51	$/barrel
NGL	—	Forward NGL price				$/gallon
Power	(65)	Forward power price	37.91	128.70	76.20	$/MW/H
Commodity contracts - physical1
Natural gas	(94)	Forward gas price	2.86	9.85	6.30	$/mmbtu2
Crude	(53)	Forward crude price	75.66	96.75	90.70	$/barrel
NGL	—	Forward NGL price	—	—	—	$/gallon
	(234)

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,
	2021	2020
(millions of Canadian dollars)
Level 3 net derivative liability at beginning of period	(191)	(69)
Total gain/(loss)
Included in earnings1	(181)	(40)
Included in OCI	(29)	7
Settlements	167	38
Level 3 net derivative liability at end of period	(234)	(64)

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

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

+ References + Details

- Definition

Tabular disclosure of all significant concentrations of risk, including credit risk and market risk, arising from all financial instruments (as defined), whether from an individual counterparty or groups of counterparties. The disclosure concerning concentrations of risk may consist of the following information: (1) for concentrations of credit risk disclosure may include: (a) information about the (shared) activity, region, or economic characteristic that identifies the concentration, (b) the maximum amount of loss due to credit risk that, based on the gross fair value of the financial instrument, the entity would incur if parties to the financial instruments that make up the concentration failed completely to perform according to the terms of the contracts and the collateral or other security, if any, for the amount due proved to be of no value to the entity, (c) the policy of requiring collateral or other security to support financial instruments subject to credit risk, information about the entity's access to that collateral or other security, and the nature and a brief description of the collateral or other security supporting those financial instruments, and (d) the policy of entering into master netting arrangements to mitigate the credit risk of financial instruments, information about the arrangements for which the entity is a party, and a brief description of the terms of those arrangements, including the extent to which they would reduce the entity's maximum amount of loss due to credit risk and (2) for disclosure of quantitative information about the market risks of financial instruments that is consistent with the way the company manages or adjusts those risks, disclosure may include: (a) more details about current positions and perhaps activity during the period, (b) the hypothetical effects on comprehensive income (or net assets), or annual income, of several possible changes in market prices, (c) a gap analysis of interest rate re-pricing or maturity dates, (d) the duration of the financial instruments, (e) the entity's value at risk from derivatives and from other positions at the end of the reporting period and the average value at risk during the year, or (f) other ways of reporting quantitative information as internally developed.

+ References + Details