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RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule 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.


September 30, 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	—	—	65	65		(37)	28
Interest rate contracts	127	—	1	128		(17)	111
Commodity contracts	—	—	414	414		(230)	184
Other contracts	1	—	5	6		—	6
	128	—	485	613	1	(284)	329
Deferred amounts and other assets
Foreign exchange contracts	—	117	203	320		(164)	156
Interest rate contracts	830	—	—	830		—	830
Commodity contracts	—	—	66	66		(26)	40
Other contracts	1	—	—	1		(1)	—
	831	117	269	1,217		(191)	1,026
Accounts payable and other
Foreign exchange contracts	—	(37)	(693)	(730)		37	(693)
Interest rate contracts	(1)	—	(16)	(17)		17	—
Commodity contracts	(32)	—	(380)	(412)		230	(182)
Other contracts	—	—	—	—		—	—
	(33)	(37)	(1,089)	(1,159)	1	284	(875)
Other long-term liabilities
Foreign exchange contracts	—	(6)	(1,423)	(1,429)		164	(1,265)
Interest rate contracts	(3)	—	—	(3)		—	(3)
Commodity contracts	(27)	—	(145)	(172)		26	(146)
Other contracts	(1)	—	—	(1)		1	—
	(31)	(6)	(1,568)	(1,605)		191	(1,414)
Total net derivative assets/(liabilities)
Foreign exchange contracts	—	74	(1,848)	(1,774)		—	(1,774)
Interest rate contracts	953	—	(15)	938		—	938
Commodity contracts	(59)	—	(45)	(104)		—	(104)
Other contracts	1	—	5	6		—	6
	895	74	(1,903)	(934)		—	(934)

1As at September 30, 2022, $28 million and $36 million were reported within Accounts receivable from affiliates and Accounts payable to affiliates, respectively, in the Consolidated Statements of Financial Position.


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)

Schedule 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, 2022	2022	2023	2024	2025	2026	Thereafter	Total
Foreign exchange contracts - US dollar forwards - purchase (millions of US dollars)	799	4	1,000	500	—	—	2,303
Foreign exchange contracts - US dollar forwards - sell (millions of US dollars)	3,017	7,185	6,134	4,361	3,761	1,481	25,939
Foreign exchange contracts - British pound (GBP) forwards - sell (millions of GBP)	7	29	30	30	28	32	156

Foreign exchange contracts - Euro forwards - sell (millions of Euro)	23	92	91	86	85	343	720
Foreign exchange contracts - Japanese yen forwards - purchase (millions of yen)	—	—	—	84,800	—	—	84,800
Interest rate contracts - short-term debt pay fixed rate (millions of Canadian dollars)	2,715	3,190	241	31	26	64	6,267
Interest rate contracts - long-term debt pay fixed rate (millions of Canadian dollars)	900	4,099	1,781	594	—	—	7,374
Equity contracts (millions of Canadian dollars)	—	36	31	11	—	—	78
Commodity contracts - natural gas (billions of cubic feet)1	33	49	21	13	3	—	119
Commodity contracts - crude oil (millions of barrels)1	3	—	—	—	—	—	3

Commodity contracts - power (megawatt per hour) (MW/H)	5	(25)	(33)	(43)	—	—	(31)	2

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

2Total 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/(loss) 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/(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,
	2022	2021	2022	2021
(millions of Canadian dollars)
Unrealized gain on derivative	122	50	221	15
Unrealized loss on hedged item	(122)	(50)	(211)	(22)
Realized loss on derivative	(5)	(1)	(101)	(40)
Realized gain on hedged item	—	—	85	45

The following table presents the effect of cash flow hedges and fair value 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,
	2022	2021	2022	2021
(millions of Canadian dollars)
Amount of unrealized gain/(loss) recognized in OCI
Cash flow hedges
Foreign exchange contracts	1	4	3	(21)
Interest rate contracts	230	(1)	1,087	293
Commodity contracts	(16)	(21)	(27)	(25)
Other contracts	(4)	(2)	(4)	2
Fair value hedges
Foreign exchange contracts	(33)	(1)	(38)	(3)


	178	(21)	1,021	246
Amount of (gain)/loss reclassified from AOCI to earnings
Foreign exchange contracts1	—	1	13	4
Interest rate contracts2	45	76	187	218
Commodity contracts	—	(4)	—	(4)
Other contracts3	1	—	3	1
	46	73	203	219

1Reported within Transportation and other services revenues and Net foreign currency gain/(loss) in the Consolidated Statements of Earnings.

2Reported within Interest expense in the Consolidated Statements of Earnings.

3Reported 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,
	2022	2021	2022	2021
(millions of Canadian dollars)
Foreign exchange contracts1	(1,379)	(436)	(1,752)	18
Interest rate contracts2	17	2	1	4
Commodity contracts3	89	(102)	59	(120)
Other contracts4	(3)	2	1	12
Total unrealized derivative fair value loss, net	(1,276)	(534)	(1,691)	(86)

1For the respective nine months ended periods, reported within Transportation and other services revenues (2022 - $375 million loss; 2021 - $71 million gain) and Net foreign currency gain/(loss) (2022 - $1,377 million loss; 2021 - $53 million loss) in the Consolidated Statements of Earnings.

2Reported as an (increase)/decrease within Interest expense in the Consolidated Statements of Earnings.

3For the respective nine months ended periods, reported within Transportation and other services revenues (2022 - $12 million gain; 2021 - nil), Commodity sales (2022 - $151 million gain; 2021 - $5 million loss), Commodity costs (2022 - $116 million loss; 2021 - $124 million loss) and Operating and administrative expense (2022 - $12 million gain; 2021 - $8 million gain) in the Consolidated Statements of Earnings.

4Reported 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, 2022	December 31, 2021
(millions of Canadian dollars)
Canadian financial institutions	637	424
US financial institutions	361	130
European financial institutions	441	181
Asian financial institutions	208	30
Other1	165	122
	1,812	887

1Other 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, 2022	Level 1	Level 2	Level 3	Total Gross Derivative Instruments
(millions of Canadian dollars)
Financial assets
Current derivative assets
Foreign exchange contracts	—	65	—	65
Interest rate contracts	—	128	—	128
Commodity contracts	120	142	152	414
Other contracts	—	6	—	6
	120	341	152	613
Long-term derivative assets
Foreign exchange contracts	—	320	—	320
Interest rate contracts	—	830	—	830
Commodity contracts	—	24	42	66
Other contracts	—	1	—	1
	—	1,175	42	1,217
Financial liabilities
Current derivative liabilities
Foreign exchange contracts	—	(730)	—	(730)
Interest rate contracts	—	(17)	—	(17)
Commodity contracts	(56)	(188)	(168)	(412)
Other contracts	—	—	—	—
	(56)	(935)	(168)	(1,159)
Long-term derivative liabilities
Foreign exchange contracts	—	(1,429)	—	(1,429)
Interest rate contracts	—	(3)	—	(3)
Commodity contracts	—	(49)	(123)	(172)
Other contracts	—	(1)	—	(1)
	—	(1,482)	(123)	(1,605)
Total net financial assets/(liabilities)
Foreign exchange contracts	—	(1,774)	—	(1,774)
Interest rate contracts	—	938	—	938
Commodity contracts	64	(71)	(97)	(104)
Other contracts	—	6	—	6
	64	(901)	(97)	(934)


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:


September 30, 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	9	Forward gas price	5.41	12.51	7.75	$/mmbtu2
Crude	5	Forward crude price	64.09	108.87	77.06	$/barrel

Power	(80)	Forward power price	35.56	207.09	93.98	$/MW/H
Commodity contracts - physical1
Natural gas	(66)	Forward gas price	3.43	22.01	7.11	$/mmbtu2
Crude	24	Forward crude price	72.52	125.74	90.39	$/barrel

Power	11	Forward power price	37.08	175.52	81.95	$/MW/H
	(97)

1Financial and physical forward commodity contracts are valued using a market approach valuation technique.

2One 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,
	2022	2021
(millions of Canadian dollars)
Level 3 net derivative liability at beginning of period	(108)	(191)
Total gain/(loss)
Included in earnings1	41	(181)
Included in OCI	(28)	(29)
Settlements	(2)	167
Level 3 net derivative liability at end of period	(97)	(234)

1Reported 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