RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2014

RISK MANAGEMENT AND FINANCIAL INSTRUMENTS

Schedule of the consolidated statements of financial position location and carrying value of the Company's derivative instruments

June 30, 2014	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	3		11		38		52		(26	)	26
Interest rate contracts	36		-		7		43		(8	)	35
Commodity contracts	1		-		81		82		(37	)	45
Other contracts	1		-		9		10		-		10
	41		11		135		187		(71	)	116
Deferred amounts and other assets
Foreign exchange contracts	6		29		13		48		(45	)	3
Interest rate contracts	78		-		-		78		(20	)	58
Commodity contracts	3		-		23		26		(15	)	11
Other contracts	3		-		2		5		-		5
	90		29		38		157		(80	)	77
Accounts payable and other
Foreign exchange contracts	(2	)	(16	)	(62	)	(80	)	26		(54	)
Interest rate contracts	(353	)	-		(9	)	(362	)	11		(351	)
Commodity contracts	(11	)	-		(210	)	(221	)	37		(184	)
	(366	)	(16	)	(281	)	(663	)	74		(589	)
Other long-term liabilities
Foreign exchange contracts	(6	)	(18	)	(357	)	(381	)	45		(336	)
Interest rate contracts	(259	)	-		-		(259	)	17		(242	)
Commodity contracts	(1	)	-		(592	)	(593	)	15		(578	)
	(266	)	(18	)	(949	)	(1,233	)	77		(1,156	)
Total net derivative asset/(liability)
Foreign exchange contracts	1		6		(368	)	(361	)	-		(361	)
Interest rate contracts	(498	)	-		(2	)	(500	)	-		(500	)
Commodity contracts	(8	)	-		(698	)	(706	)	-		(706	)
Other contracts	4		-		11		15		-		15
	(501	)	6		(1,057	)	(1,552	)	-		(1,552	)

December 31, 2013	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	16		11		51		78		(26	)	52
Interest rate contracts	171		-		12		183		(27	)	156
Commodity contracts	4		-		114		118		(64	)	54
Other contracts	2		-		4		6		-		6
	193		11		181		385		(117	)	268
Deferred amounts and other assets
Foreign exchange contracts	7		33		27		67		(62	)	5
Interest rate contracts	249		-		1		250		(47	)	203
Commodity contracts	9		-		86		95		(67	)	28
Other contracts	1		-		-		1		-		1
	266		33		114		413		(176	)	237
Accounts payable and other
Foreign exchange contracts	(2	)	(4	)	(69	)	(75	)	26		(49	)
Interest rate contracts	(387	)	-		(16	)	(403	)	45		(358	)
Commodity contracts	(14	)	-		(345	)	(359	)	64		(295	)
	(403	)	(4	)	(430	)	(837	)	135		(702	)
Other long-term liabilities
Foreign exchange contracts	(4	)	(31	)	(435	)	(470	)	62		(408	)
Interest rate contracts	(68	)	-		(1	)	(69	)	29		(40	)
Commodity contracts	(2	)	-		(854	)	(856	)	67		(789	)
	(74	)	(31	)	(1,290	)	(1,395	)	158		(1,237	)
Total net derivative asset/(liability)
Foreign exchange contracts	17		9		(426	)	(400	)	-		(400	)
Interest rate contracts	(35	)	-		(4	)	(39	)	-		(39	)
Commodity contracts	(3	)	-		(999	)	(1,002	)	-		(1,002	)
Other contracts	3		-		4		7		-		7
	(18	)	9		(1,425	)	(1,434	)	-		(1,434	)

Schedule of the maturity and notional principal or quantity outstanding related to the Company's derivative instruments

June 30, 2014	2014		2015		2016		2017		2018		Thereafter
Foreign exchange contracts - United States dollar forwards - purchase (millions of United States dollars)	307		25		25		413		2		4
Foreign exchange contracts - United States dollar forwards - sell (millions of United States dollars)	1,936		2,751		2,323		2,557		1,714		3,771
Foreign exchange contracts - Euro forwards - purchase (millions of Euros)	2		28		-		-		-		-
Interest rate contracts - short-term borrowings (millions of Canadian dollars)	2,612		5,222		5,013		4,048		2,443		639
Interest rate contracts - long-term debt (millions of Canadian dollars)	4,184		1,780		1,816		1,090		-		-
Equity contracts (millions of Canadian dollars)	45		45		48		-		-		-
Commodity contracts - natural gas (billions of cubic feet)	(78	)	(50	)	(20	)	(13	)	-		-
Commodity contracts - crude oil (millions of barrels)	(3	)	(23	)	(24	)	(18	)	(9	)	-
Commodity contracts - NGL (millions of barrels)	(17	)	(6	)	(1	)	-		-		-
Commodity contracts - power (megawatt hours (MWH))	39		5		20		40		30		8

December 31, 2013	2014		2015		2016		2017		2018		Thereafter
Foreign exchange contracts - United States dollar forwards - purchase (millions of United States dollars)	710		25		25		413		2		4
Foreign exchange contracts - United States dollar forwards - sell (millions of United States dollars)	2,795		2,751		2,323		2,557		1,649		3,771
Foreign exchange contracts - Euro forwards - purchase (millions of Euros)	5		28		-		-		-		-
Interest rate contracts - short-term borrowings (millions of Canadian dollars)	5,007		5,210		5,030		3,965		274		267
Interest rate contracts - long-term debt (millions of Canadian dollars)	5,736		1,779		1,814		1,090		-		-
Equity contracts (millions of Canadian dollars)	40		41		-		-		-		-
Commodity contracts - natural gas (billions of cubic feet)	17		(8	)	10		11		46		-
Commodity contracts - crude oil (millions of barrels)	(34	)	(29	)	(23	)	(18	)	(9	)	-
Commodity contracts - NGL (millions of barrels)	(10	)	(2	)	-		-		-		-
Commodity contracts - power (MWH)	55		5		20		40		30		8

Schedule of effect of cash flow hedges and net investment hedges on the Company's consolidated earnings and consolidated comprehensive income, before the effect of income taxes

	Three months ended June 30,					Six months ended June 30,
		2014		2013			2014		2013
(millions of Canadian dollars)
Amount of unrealized gains/(loss) recognized in OCI
Cash flow hedges
Foreign exchange contracts		(60	)	33			(31	)	47
Interest rate contracts		(279	)	710			(521	)	789
Commodity contracts		(10	)	17			(17	)	17
Other contracts		3		(3	)		8		(1	)
Net investment hedges
Foreign exchange contracts		45		(45	)		(3	)	(67	)
		(301	)	712			(564	)	785
Amount of gains/(loss) reclassified from AOCI to earnings (effective portion)
Foreign exchange contracts1		16		(3	)		15		(3	)
Interest rate contracts2		23		33			44		46
Commodity contracts3		5		(4	)		12		(4	)
Other contracts4		(3	)	-			(7	)	-
		41		26			64		39
Amount of gains/(loss) reclassified from AOCI to earnings (ineffective portion and amount excluded from effectiveness testing)
Interest rate contracts2		3		(15	)		28		23
Commodity contracts3		2		(1	)		3		(2	)
		5		(16	)		31		21

1 Reported within Other income/(expense) in the Consolidated Statements of Earnings.

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

3 Reported within Commodity costs in the Consolidated Statements of Earnings.

4 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 the Company's non-qualifying derivatives

		Three months ended June 30,				Six months ended June 30,
			2014	2013			2014	2013
(millions of Canadian dollars)
Foreign exchange contracts1			478	(508	)		58	(701	)
Interest rate contracts2			1	(1	)		2	(5	)
Commodity contracts3			128	157			301	104
Other contracts4			2	(2	)		7	4
Total unrealized derivative fair value gains/(loss)			609	(354	)		368	(598	)
1	Reported within Transportation and other services revenues (2014 - $56 million gain; 2013 - $376 million loss) and Other income/(expense) (2014 - $2 million gain; 2013 - $325 million loss) in the Consolidated Statements of Earnings.
2	Reported as an (increase)/decrease to Interest expense in the Consolidated Statements of Earnings.
3	Reported within Transportation and other services revenues (2014 - $305 million gain; 2013 - $170 million gain), Commodity costs (2014 - $1 million loss; 2013 - $6 million gain) and Operating and administrative expense (2014 - $3 million loss; 2013 - $72 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

		June 30, 2014	December 31, 2013
(millions of Canadian dollars)
Canadian financial institutions		125	230
United States financial institutions		46	227
European financial institutions		70	192
Other1		74	97
		315	746
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

June 30, 2014	Level 1		Level 2		Level 3		Total Gross Derivative Instruments
(millions of Canadian dollars)
Financial assets
Current derivative assets
Foreign exchange contracts	-		52		-		52
Interest rate contracts	-		43		-		43
Commodity contracts	1		19		62		82
Other contracts	-		10		-		10
	1		124		62		187
Long-term derivative assets
Foreign exchange contracts	-		48		-		48
Interest rate contracts	-		78		-		78
Commodity contracts	-		9		17		26
Other contracts	-		5		-		5
	-		140		17		157
Financial liabilities
Current derivative liabilities
Foreign exchange contracts	-		(80	)	-		(80	)
Interest rate contracts	-		(362	)	-		(362	)
Commodity contracts	(4	)	(126	)	(91	)	(221	)
	(4	)	(568	)	(91	)	(663	)
Long-term derivative liabilities
Foreign exchange contracts	-		(381	)	-		(381	)
Interest rate contracts	-		(259	)	-		(259	)
Commodity contracts	-		(433	)	(160	)	(593	)
	-		(1,073	)	(160	)	(1,233	)
Total net financial asset/(liability)
Foreign exchange contracts	-		(361	)	-		(361	)
Interest rate contracts	-		(500	)	-		(500	)
Commodity contracts	(3	)	(531	)	(172	)	(706	)
Other contracts	-		15		-		15
	(3	)	(1,377	)	(172	)	(1,552	)

December 31, 2013	Level 1		Level 2		Level 3		Total Gross Derivative Instruments
(millions of Canadian dollars)
Financial assets
Current derivative assets
Foreign exchange contracts	-		78		-		78
Interest rate contracts	-		183		-		183
Commodity contracts	6		42		70		118
Other contracts	-		6		-		6
	6		309		70		385
Long-term derivative assets
Foreign exchange contracts	-		67		-		67
Interest rate contracts	-		250		-		250
Commodity contracts	-		72		23		95
Other contracts	-		1		-		1
	-		390		23		413
Financial liabilities
Current derivative liabilities
Foreign exchange contracts	-		(75	)	-		(75	)
Interest rate contracts	-		(403	)	-		(403	)
Commodity contracts	(9	)	(248	)	(102	)	(359	)
	(9	)	(726	)	(102	)	(837	)
Long-term derivative liabilities
Foreign exchange contracts	-		(470	)	-		(470	)
Interest rate contracts	-		(69	)	-		(69	)
Commodity contracts	-		(701	)	(155	)	(856	)
	-		(1,240	)	(155	)	(1,395	)
Total net financial asset/(liability)
Foreign exchange contracts	-		(400	)	-		(400	)
Interest rate contracts	-		(39	)	-		(39	)
Commodity contracts	(3	)	(835	)	(164	)	(1,002	)
Other contracts	-		7		-		7
	(3	)	(1,267	)	(164	)	(1,434	)

Schedule of significant unobservable inputs used in the fair value measurement of Level 3 derivative instruments

June 30, 2014	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	3		Forward gas price	3.95	5.25	4.60	$/mmbtu3
NGL	(6	)	Forward NGL price	0.29	2.20	1.33	$/gallon
Power	(146	)	Forward power price	43.00	79.20	58.34	$/MWH
Commodity contracts - physical1
Natural gas	(10	)	Forward gas price	3.50	5.31	4.39	$/mmbtu3
Crude	(16	)	Forward crude price	82.85	122.61	99.87	$/barrel
NGL	6		Forward NGL price	0.04	2.39	1.65	$/gallon
Commodity options2
Crude	(5	)	Option volatility	14%	18%	16%
NGL	2		Option volatility	24%	30%	26%
	(172	)

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

2 Commodity options contracts are valued using an option model valuation technique.

3 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

	Six months ended June 30,
	2014	2013
(millions of Canadian dollars)
Level 3 net derivative liability at beginning of period	(164)	(24	)
Total gains/(loss)
Included in earnings1	(18)	(74	)
Included in OCI	-	11
Settlements	10	8
Level 3 net derivative liability at end of period	(172)	(79	)

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.

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- 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.

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