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RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2022

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 Consolidated Statements of Financial Position location and carrying value of our derivative instruments, as well as the maximum potential settlement amounts in the event of the specific circumstances described above. All amounts are presented gross in the Consolidated Statements of Financial Position.


March 31, 2022	Derivative Instruments Used as Cash Flow 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	—	—	342	342	(52)	290
Interest rate contracts	149	—	—	149	—	149
Commodity contracts	—	—	274	274	(186)	88
Other contracts	3	—	7	10	—	10
	152	—	623	775	(238)	537
Deferred amounts and other assets
Foreign exchange contracts	—	—	470	470	(142)	328
Interest rate contracts	283	—	—	283	—	283
Commodity contracts	—	—	56	56	(23)	33
Other contracts	3	—	2	5	—	5
	286	—	528	814	(165)	649
Accounts payable and other
Foreign exchange contracts	—	—	(187)	(187)	52	(135)
Interest rate contracts	(28)	—	(23)	(51)	—	(51)
Commodity contracts	(14)	—	(381)	(395)	186	(209)

	(42)	—	(591)	(633)	238	(395)
Other long-term liabilities
Foreign exchange contracts	—	(37)	(292)	(329)	142	(187)
Interest rate contracts	(4)	—	—	(4)	—	(4)
Commodity contracts	(13)	—	(96)	(109)	23	(86)

	(17)	(37)	(388)	(442)	165	(277)
Total net derivative assets/(liabilities)
Foreign exchange contracts	—	(37)	333	296	—	296
Interest rate contracts	400	—	(23)	377	—	377
Commodity contracts	(27)	—	(147)	(174)	—	(174)
Other contracts	6	—	9	15	—	15
	379	(37)	172	514	—	514


December 31, 2021	Derivative Instruments Used as Cash Flow 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	—	—	259	259	(41)	218
Interest rate contracts	64	—	—	64	—	64
Commodity contracts	—	—	204	204	(129)	75
Other contracts	—	—	2	2	—	2
	64	—	465	529	(170)	359
Deferred amounts and other assets
Foreign exchange contracts	—	—	240	240	(61)	179
Interest rate contracts	88	—	—	88	(1)	87
Commodity contracts	—	—	29	29	(13)	16
Other contracts	—	—	3	3	—	3
	88	—	272	360	(75)	285
Accounts payable and other
Foreign exchange contracts	(15)	(112)	(176)	(303)	41	(262)
Interest rate contracts	(150)	—	—	(150)	—	(150)
Commodity contracts	(14)	—	(250)	(264)	129	(135)

	(179)	(112)	(426)	(717)	170	(547)
Other long-term liabilities
Foreign exchange contracts	—	—	(423)	(423)	61	(362)
Interest rate contracts	(1)	—	(23)	(24)	1	(23)
Commodity contracts	(17)	—	(67)	(84)	13	(71)

	(18)	—	(513)	(531)	75	(456)
Total net derivative assets/(liabilities)
Foreign exchange contracts	(15)	(112)	(100)	(227)	—	(227)
Interest rate contracts	1	—	(23)	(22)	—	(22)
Commodity contracts	(31)	—	(84)	(115)	—	(115)
Other contracts	—	—	5	5	—	5
	(45)	(112)	(202)	(359)	—	(359)

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, 2022	2022	2023	2024	2025	2026	Thereafter	Total
Foreign exchange contracts - US dollar forwards - purchase (millions of US dollars)	848	—	1,000	500	—	—	2,348
Foreign exchange contracts - US dollar forwards - sell (millions of US dollars)	7,544	5,794	4,544	3,372	2,772	492	24,518
Foreign exchange contracts - British pound (GBP) forwards - sell (millions of GBP)	21	29	30	30	28	32	170

Foreign exchange contracts - Euro forwards - sell (millions of Euro)	95	92	91	86	85	343	792
Foreign exchange contracts - Japanese yen forwards - purchase (millions of yen)	52,500	—	—	—	—	—	52,500
Interest rate contracts - short-term debt pay fixed rate (millions of Canadian dollars)	536	796	128	30	26	64	1,580
Interest rate contracts - long-term debt pay fixed rate (millions of Canadian dollars)	2,549	2,587	1,687	562	—	—	7,385
Equity contracts (millions of Canadian dollars)	—	26	21	—	—	—	47
Commodity contracts - natural gas (billions of cubic feet)1	172	33	13	11	—	—	229
Commodity contracts - crude oil (millions of barrels)1	10	(1)	—	—	—	—	9

Commodity contracts - power (megawatt per hour) (MW/H)	(14)	(43)	(43)	(43)	—	—	(37)	2

1 Total is a net purchase/(sale) of underlying commodity.

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

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 is included in Net foreign currency gain or Interest expense in the Consolidated Statements of Earnings. The offsetting loss or gain on the hedged item attributable to the hedged risk is included in Net foreign currency gain in the Consolidated Statements of Earnings. Any excluded components are included in the Consolidated Statements of Comprehensive Income.


	Three months ended March 31,
	2022	2021
(millions of Canadian dollars)
Unrealized gain/(loss) on derivative	76	(3)
Unrealized loss on hedged item	(87)	(4)
Realized loss on derivative	(75)	(39)
Realized gain on hedged item	85	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 March 31,
	2022	2021
(millions of Canadian dollars)
Amount of unrealized gain/(loss) recognized in OCI
Cash flow hedges
Foreign exchange contracts	2	(20)
Interest rate contracts	377	497
Commodity contracts	4	(8)
Other contracts	3	3
Fair value hedges
Foreign exchange contracts	(1)	(1)


	385	471
Amount of loss reclassified from AOCI to earnings
Foreign exchange contracts1	13	1
Interest rate contracts2	76	63
Commodity contracts	—	1
Other contracts3	2	—
	91	65

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 March 31,
	2022	2021
(millions of Canadian dollars)
Foreign exchange contracts1	433	236
Interest rate contracts2	—	2
Commodity contracts3	(68)	72
Other contracts4	4	5
Total unrealized derivative fair value gain/(loss), net	369	315

1 For the respective three months ended periods, reported within Transportation and other services revenues (2022 - $134 million gain; 2021 - $154 million gain) and Net foreign currency gain (2022 - $299 million gain; 2021 - $82 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 (2022 - $16 million loss; 2021 - $3 million loss), Commodity sales (2022 - $16 million loss; 2021 - $171 million gain), Commodity costs (2022 - $37 million loss; 2021 - $100 million loss) and Operating and administrative expense (2022 - $1 million gain; 2021 - $4 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, 2022	December 31, 2021
(millions of Canadian dollars)
Canadian financial institutions	800	424
US financial institutions	210	130
European financial institutions	347	181
Asian financial institutions	66	30
Other1	161	122
	1,584	887

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, 2022	Level 1	Level 2	Level 3	Total Gross Derivative Instruments
(millions of Canadian dollars)
Financial assets
Current derivative assets
Foreign exchange contracts	—	342	—	342
Interest rate contracts	—	149	—	149
Commodity contracts	36	172	66	274
Other contracts	—	10	—	10
	36	673	66	775
Long-term derivative assets
Foreign exchange contracts	—	470	—	470
Interest rate contracts	—	283	—	283
Commodity contracts	—	24	32	56
Other contracts	—	5	—	5
	—	782	32	814
Financial liabilities
Current derivative liabilities
Foreign exchange contracts	—	(187)	—	(187)
Interest rate contracts	—	(51)	—	(51)
Commodity contracts	(27)	(168)	(200)	(395)

	(27)	(406)	(200)	(633)
Long-term derivative liabilities
Foreign exchange contracts	—	(329)	—	(329)
Interest rate contracts	—	(4)	—	(4)
Commodity contracts	—	(31)	(78)	(109)

	—	(364)	(78)	(442)
Total net financial assets/(liabilities)
Foreign exchange contracts	—	296	—	296
Interest rate contracts	—	377	—	377
Commodity contracts	9	(3)	(180)	(174)
Other contracts	—	15	—	15
	9	685	(180)	514


December 31, 2021	Level 1	Level 2	Level 3	Total Gross Derivative Instruments
(millions of Canadian dollars)
Financial assets
Current derivative assets
Foreign exchange contracts	—	259	—	259
Interest rate contracts	—	64	—	64
Commodity contracts	38	71	95	204
Other contracts	—	2	—	2
	38	396	95	529
Long-term derivative assets
Foreign exchange contracts	—	240	—	240
Interest rate contracts	—	88	—	88
Commodity contracts	—	21	8	29
Other contracts	—	3	—	3
	—	352	8	360
Financial liabilities
Current derivative liabilities
Foreign exchange contracts	—	(303)	—	(303)
Interest rate contracts	—	(150)	—	(150)
Commodity contracts	(52)	(66)	(146)	(264)

	(52)	(519)	(146)	(717)
Long-term derivative liabilities
Foreign exchange contracts	—	(423)	—	(423)
Interest rate contracts	—	(24)	—	(24)
Commodity contracts	—	(19)	(65)	(84)

	—	(466)	(65)	(531)
Total net financial assets/(liabilities)
Foreign exchange contracts	—	(227)	—	(227)
Interest rate contracts	—	(22)	—	(22)
Commodity contracts	(14)	7	(108)	(115)
Other contracts	—	5	—	5
	(14)	(237)	(108)	(359)

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, 2022	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	5	Forward gas price	3.94	9.60	6.24	$/mmbtu2
Crude	(3)	Forward crude price	83.47	124.49	106.20	$/barrel

Power	(54)	Forward power price	22.33	121.08	77.14	$/MW/H
Commodity contracts - physical1
Natural gas	(97)	Forward gas price	3.48	15.02	6.23	$/mmbtu2
Crude	(31)	Forward crude price	97.55	139.67	118.41	$/barrel

	(180)

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,
	2022	2021
(millions of Canadian dollars)
Level 3 net derivative liability at beginning of period	(108)	(191)
Total gain/(loss)
Included in earnings1	(52)	(72)
Included in OCI	4	(5)
Settlements	(24)	149
Level 3 net derivative liability at end of period	(180)	(119)

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