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RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2023

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, 2023	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)
Other current assets
Foreign exchange contracts	—	71	32	103	(25)	78
Interest rate contracts	318	—	66	384	(3)	381
Commodity contracts	—	—	206	206	(153)	53

	318	71	304	693	(181)	512
Deferred amounts and other assets
Foreign exchange contracts	—	31	109	140	(90)	50
Interest rate contracts	130	—	19	149	—	149
Commodity contracts	—	—	57	57	(36)	21

	130	31	185	346	(126)	220
Other current liabilities
Foreign exchange contracts	—	(49)	(163)	(212)	25	(187)
Interest rate contracts	—	—	(3)	(3)	3	—
Commodity contracts	(19)	—	(343)	(362)	153	(209)
Other contracts	—	—	(2)	(2)	—	(2)
	(19)	(49)	(511)	(579)	181	(398)
Other long-term liabilities
Foreign exchange contracts	—	(36)	(1,004)	(1,040)	90	(950)
Interest rate contracts	(2)	—	—	(2)	—	(2)
Commodity contracts	(10)	—	(166)	(176)	36	(140)
Other contracts	(1)	—	(1)	(2)	—	(2)
	(13)	(36)	(1,171)	(1,220)	126	(1,094)
Total net derivative asset/(liability)
Foreign exchange contracts	—	17	(1,026)	(1,009)	—	(1,009)
Interest rate contracts	446	—	82	528	—	528
Commodity contracts	(29)	—	(246)	(275)	—	(275)
Other contracts	(1)	—	(3)	(4)	—	(4)
	416	17	(1,193)	(760)	—	(760)


December 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)
Other current assets
Foreign exchange contracts	—	—	46	46	(41)	5
Interest rate contracts	649	—	11	660	—	660
Commodity contracts	—	—	302	302	(182)	120
Other contracts	—	—	7	7	—	7
	649	—	366	1,015	(223)	792
Deferred amounts and other assets
Foreign exchange contracts	—	156	153	309	(138)	171
Interest rate contracts	254	—	—	254	—	254
Commodity contracts	—	—	61	61	(25)	36
Other contracts	1	—	2	3	—	3
	255	156	216	627	(163)	464
Other current liabilities
Foreign exchange contracts	—	(42)	(524)	(566)	41	(525)

Commodity contracts	(48)	—	(284)	(332)	182	(150)

	(48)	(42)	(808)	(898)	223	(675)
Other long-term liabilities
Foreign exchange contracts	—	—	(1,116)	(1,116)	138	(978)
Interest rate contracts	(3)	—	(1)	(4)	—	(4)
Commodity contracts	(37)	—	(133)	(170)	25	(145)

	(40)	—	(1,250)	(1,290)	163	(1,127)
Total net derivative asset/(liability)
Foreign exchange contracts	—	114	(1,441)	(1,327)	—	(1,327)
Interest rate contracts	900	—	10	910	—	910
Commodity contracts	(85)	—	(54)	(139)	—	(139)
Other contracts	1	—	9	10	—	10
	816	114	(1,476)	(546)	—	(546)

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, 2023	2023	2024	2025	2026	2027	Thereafter	Total
Foreign exchange contracts - US dollar forwards - purchase (millions of US dollars)	114	1,000	500	—	—	—	1,614
Foreign exchange contracts - US dollar forwards - sell (millions of US dollars)	1,593	5,440	4,955	4,325	3,647	2,886	22,846
Foreign exchange contracts - British pound (GBP) forwards - sell (millions of GBP)	7	30	30	28	32	—	127

Foreign exchange contracts - Euro forwards - sell (millions of Euro)	27	91	86	85	81	262	632
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)	2,656	5,645	1,364	1,097	75	39	10,876
Interest rate contracts - short-term debt receive fixed rate (millions of Canadian dollars)	229	946	946	179	—	—	2,300
Interest rate contracts - long-term debt pay fixed rate (millions of Canadian dollars)	1,726	400	588	—	—	—	2,714
Interest rate contracts - costless collar (millions of Canadian dollars)	—	—	394	11	—	—	405
Equity contracts (millions of Canadian dollars)	—	33	12	—	—	—	45
Commodity contracts - natural gas (billions of cubic feet)	6	45	27	9	7	—	94
Commodity contracts - crude oil (millions of barrels)	5	(3)	—	—	—	—	2

Commodity contracts - power (megawatt per hour) (MW/H)	61	3	(42)	(49)	(53)	(50)	(33)	1

1Total 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 Other income/(expense) 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 Other income/(expense) 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,
	2023	2022	2023	2022
(millions of Canadian dollars)
Unrealized gain/(loss) on derivative	35	122	(107)	221
Unrealized gain/(loss) on hedged item	(35)	(122)	106	(211)
Realized loss on derivative	(11)	(5)	(34)	(101)
Realized gain on hedged item	—	—	—	85

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,
	2023	2022	2023	2022
(millions of Canadian dollars)
Amount of unrealized gain/(loss) recognized in OCI
Cash flow hedges
Foreign exchange contracts	—	1	—	3
Interest rate contracts	313	230	423	1,087
Commodity contracts	20	(16)	56	(27)
Other contracts	(1)	(4)	(3)	(4)
Fair value hedges
Foreign exchange contracts	2	(33)	11	(38)


	334	178	487	1,021
Amount of loss reclassified from AOCI to earnings
Foreign exchange contracts1	—	—	—	13
Interest rate contracts2	40	45	63	187
Commodity contracts3	1	—	—	—
Other contracts4	—	1	1	3
	41	46	64	203

1Reported within Transportation and other services revenues and Other income/(expense) in the Consolidated Statements of Earnings.

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

3Reported within Transportation and other services in the Consolidated Statements of Earnings.

4Reported 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,
	2023	2022	2023	2022
(millions of Canadian dollars)
Foreign exchange contracts1	(650)	(1,379)	415	(1,752)
Interest rate contracts2	17	17	72	1
Commodity contracts3	(229)	89	(206)	59
Other contracts4	(3)	(3)	(11)	1
Total unrealized derivative fair value gain/(loss), net	(865)	(1,276)	270	(1,691)

1For the respective nine months ended periods, reported within Transportation and other services revenues (2023 - $645 million gain; 2022 - $375 million loss) and Other income/(expense) (2023 - $230 million loss; 2022 - $1,377 million loss) in the Consolidated Statements of Earnings.

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

3For the respective nine months ended periods, reported within Transportation and other services revenues (2023 - $85 million loss; 2022 - $12 million gain), Commodity sales (2023 - $75 million gain; 2022 - $151 million gain), Commodity costs (2023 - $136 million loss; 2022 - $116 million loss) and Operating and administrative expense (2023 - $60 million loss; 2022 - $12 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, 2023	December 31, 2022
(millions of Canadian dollars)
Canadian financial institutions	495	644
US financial institutions	226	277
European financial institutions	123	334
Asian financial institutions	120	224
Other1	66	105
	1,030	1,584

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, 2023	Level 1	Level 2	Level 3	Total Gross Derivative Instruments
(millions of Canadian dollars)
Financial assets
Current derivative assets
Foreign exchange contracts	—	103	—	103
Interest rate contracts	—	384	—	384
Commodity contracts	58	36	112	206

	58	523	112	693
Long-term derivative assets
Foreign exchange contracts	—	140	—	140
Interest rate contracts	—	149	—	149
Commodity contracts	—	16	41	57

	—	305	41	346
Financial liabilities
Current derivative liabilities
Foreign exchange contracts	—	(212)	—	(212)
Interest rate contracts	—	(3)	—	(3)
Commodity contracts	(93)	(50)	(219)	(362)
Other contracts	—	(2)	—	(2)
	(93)	(267)	(219)	(579)
Long-term derivative liabilities
Foreign exchange contracts	—	(1,040)	—	(1,040)
Interest rate contracts	—	(2)	—	(2)
Commodity contracts	—	(20)	(156)	(176)
Other contracts	—	(2)	—	(2)
	—	(1,064)	(156)	(1,220)
Total net financial asset/(liability)
Foreign exchange contracts	—	(1,009)	—	(1,009)
Interest rate contracts	—	528	—	528
Commodity contracts	(35)	(18)	(222)	(275)
Other contracts	—	(4)	—	(4)
	(35)	(503)	(222)	(760)


December 31, 2022	Level 1	Level 2	Level 3	Total Gross Derivative Instruments
(millions of Canadian dollars)
Financial assets
Current derivative assets
Foreign exchange contracts	—	46	—	46
Interest rate contracts	—	660	—	660
Commodity contracts	65	90	147	302
Other contracts	—	7	—	7
	65	803	147	1,015
Long-term derivative assets
Foreign exchange contracts	—	309	—	309
Interest rate contracts	—	254	—	254
Commodity contracts	—	17	44	61
Other contracts	—	3	—	3
	—	583	44	627
Financial liabilities
Current derivative liabilities
Foreign exchange contracts	—	(566)	—	(566)

Commodity contracts	(60)	(77)	(195)	(332)

	(60)	(643)	(195)	(898)
Long-term derivative liabilities
Foreign exchange contracts	—	(1,116)	—	(1,116)
Interest rate contracts	—	(4)	—	(4)
Commodity contracts	—	(38)	(132)	(170)

	—	(1,158)	(132)	(1,290)
Total net financial asset/(liability)
Foreign exchange contracts	—	(1,327)	—	(1,327)
Interest rate contracts	—	910	—	910
Commodity contracts	5	(8)	(136)	(139)
Other contracts	—	10	—	10
	5	(415)	(136)	(546)

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, 2023	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	1.69	10.93	4.67	$/mmbtu2
Crude	(32)	Forward crude price	83.38	120.51	98.08	$/barrel

Power	(77)	Forward power price	30.75	160.92	65.98	$/MW/H
Commodity contracts - physical1
Natural gas	(13)	Forward gas price	1.58	23.92	5.04	$/mmbtu2
Crude	(19)	Forward crude price	84.35	128.65	107.59	$/barrel

Power	(61)	Forward power price	24.47	164.58	61.70	$/MW/H
	(222)

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,
	2023	2022
(millions of Canadian dollars)
Level 3 net derivative liability at beginning of period	(136)	(108)
Total gain/(loss)
Included in earnings1	(205)	41
Included in OCI	—	(28)
Settlements	119	(2)
Level 3 net derivative liability at end of period	(222)	(97)

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

- 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