RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2016

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, 2016	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	86		3		8		97		(47	)	50
Interest rate contracts	1		-		-		1		(1	)	-
Commodity contracts	7		-		499		506		(95	)	411
Other contracts	-		-		3		3		(1	)	2

	94		3		510		607		(144	)	463

Deferred amounts and other assets
Foreign exchange contracts	2		5		83		90		(80	)	10
Commodity contracts	-		-		116		116		(21	)	95

	2		5		199		206		(101	)	105

Accounts payable and other
Foreign exchange contracts	-		(150	)	(604	)	(754	)	47		(707	)
Interest rate contracts	(759	)	-		(187	)	(946	)	1		(945	)
Commodity contracts	-		-		(477	)	(477	)	95		(382	)
Other contracts	-		-		(1	)	(1	)	1		-

	(759	)	(150	)	(1,269	)	(2,178	)	144		(2,034	)

Other long-term liabilities
Foreign exchange contracts	-		(138	)	(1,992	)	(2,130	)	80		(2,050	)
Interest rate contracts	(959	)	-		(214	)	(1,173	)	-		(1,173	)
Commodity contracts	(1	)	-		(205	)	(206	)	21		(185	)
Other contracts	(3	)	-		(2	)	(5	)	-		(5	)

	(963	)	(138	)	(2,413	)	(3,514	)	101		(3,413	)

Total net derivative asset/(liability)
Foreign exchange contracts	88		(280	)	(2,505	)	(2,697	)	-		(2,697	)
Interest rate contracts	(1,717	)	-		(401	)	(2,118	)	-		(2,118	)
Commodity contracts	6		-		(67	)	(61	)	-		(61	)
Other contracts	(3	)	-		-		(3	)	-		(3	)

	(1,626	)	(280	)	(2,973	)	(4,879	)	-		(4,879	)

December 31, 2015	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	6		2		2		10		(3	)	7
Interest rate contracts	2		-		-		2		(2	)	-
Commodity contracts	7		-		772		779		(211	)	568
Other contracts	-		-		-		-		-		-

	15		2		774		791		(216	)	575

Deferred amounts and other assets
Foreign exchange contracts	114		4		10		128		(127	)	1
Interest rate contracts	18		-		-		18		(14	)	4
Commodity contracts	7		-		220		227		(77	)	150
Other contracts	-		-		-		-		-		-

	139		4		230		373		(218	)	155

Accounts payable and other
Foreign exchange contracts	(1	)	(106	)	(765	)	(872	)	3		(869	)
Interest rate contracts	(379	)	-		(185	)	(564	)	2		(562	)
Commodity contracts	-		-		(501	)	(501	)	194		(307	)
Other contracts	(2	)	-		(6	)	(8	)	-		(8	)

	(382	)	(106	)	(1,457	)	(1,945	)	199		(1,746	)

Other long-term liabilities
Foreign exchange contracts	-		(252	)	(2,796	)	(3,048	)	127		(2,921	)
Interest rate contracts	(405	)	-		(224	)	(629	)	14		(615	)
Commodity contracts	-		-		(260	)	(260	)	77		(183	)
Other contracts	(8	)	-		(5	)	(13	)	-		(13	)

	(413	)	(252	)	(3,285	)	(3,950	)	218		(3,732	)

Total net derivative asset/(liability)
Foreign exchange contracts	119		(352	)	(3,549	)	(3,782	)	-		(3,782	)
Interest rate contracts	(764	)	-		(409	)	(1,173	)	-		(1,173	)

Commodity contracts	14		-		231		245		(17	)1	228
Other contracts	(10	)	-		(11	)	(21	)	-		(21	)

	(641	)	(352	)	(3,738	)	(4,731	)	(17	)	(4,748	)

Amount available for offset includes $17 million of cash collateral.

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

June 30, 2016	2016		2017		2018		2019		2020		Thereafter
Foreign exchange contracts - United States dollar forwards - purchase (millions of United States dollars)	473		413		2		2		2		-
Foreign exchange contracts - United States dollar forwards - sell (millions of United States dollars)	2,134		3,395		2,756		2,943		2,722		787
Foreign exchange contracts - GBP forwards - purchase (millions of GBP)	26		77		6		-		-		-
Foreign exchange contracts - GBP forwards - sell (millions of GBP)	-		-		-		89		25		144
Foreign exchange contracts - Japanese yen forwards - purchase (millions of yen)	-		-		-		32,662		-		-
Interest rate contracts - short-term borrowings (millions of Canadian dollars)	4,207		7,343		4,352		1,497		149		394
Interest rate contracts - long-term debt (millions of Canadian dollars)	4,183		3,282		1,906		763		-		-
Equity contracts (millions of Canadian dollars)	49		48		40		-		-		-
Commodity contracts - natural gas (billions of cubic feet)	(76	)	(87	)	(33	)	(7	)	(6	)	(6	)
Commodity contracts - crude oil (millions of barrels)	(1	)	(19	)	(9	)	-		-		-
Commodity contracts - NGL (millions of barrels)	(5	)	-		-		-		-		-
Commodity contracts - power (megawatt hours (MWH))	42		40		30		31		35		(35	)

December 31, 2015	2016		2017		2018		2019	2020	Thereafter
Foreign exchange contracts - United States dollar forwards - purchase (millions of United States dollars)	172		413		2		2	2	-
Foreign exchange contracts - United States dollar forwards - sell (millions of United States dollars)	3,059		3,213		3,133		2,630	2,303	787
Foreign exchange contracts - GBP forwards - purchase (millions of GBP)	70		77		6		-	-	-
Foreign exchange contracts - GBP forwards - sell (millions of GBP)	-		-		-		89	25	144
Interest rate contracts - short-term borrowings (millions of Canadian dollars)	8,382		7,604		4,536		1,574	156	406
Interest rate contracts - long-term debt (millions of Canadian dollars)	4,291		3,371		1,960		773	-	-
Equity contracts (millions of Canadian dollars)	51		48		-		-	-	-
Commodity contracts - natural gas (billions of cubic feet)	(126	)	(209	)	(17	)	2	1	-
Commodity contracts - crude oil (millions of barrels)	(6	)	(17	)	(9	)	-	-	-
Commodity contracts - NGL (millions of barrels)	(5	)	1		-		-	-	-
Commodity contracts - power (megawatt hours (MWH))	40		40		30		31	35	(35	)

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,
	2016		2015	2016		2015
(millions of Canadian dollars)
Amount of unrealized gains/(loss) recognized in OCI
Cash flow hedges
Foreign exchange contracts	2		(15)	(33	)	30
Interest rate contracts	(428	)	392	(1,004	)	(272	)
Commodity contracts	(18	)	(29)	(2	)	(10	)
Other contracts	6		(6)	37		(14	)
Net investment hedges
Foreign exchange contracts	(12	)	22	72		(101	)

	(450	)	364	(930	)	(367	)

Amount of (gains)/loss reclassified from AOCI to earnings (effective portion)
Foreign exchange contracts1	(1	)	6	2		6
Interest rate contracts2	72		23	51		33
Commodity contracts3	2		(2)	(6	)	(22	)
Other contracts4	(4	)	1	(30	)	6

	69		28	17		23

Amount of (gains)/loss reclassified from AOCI to earnings (ineffective portion and amount excluded from effectiveness testing)
Interest rate contracts2	5		(12)	31		(35	)
Commodity contracts3	-		-	-		5

	5		(12)	31		(30	)

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

Reported within Interest expense in the Consolidated Statements of Earnings.

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

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,
	2016		2015	2016		2015
(millions of Canadian dollars)
Foreign exchange contracts1	28		388	1,044		(905	)
Interest rate contracts2	4		-	8		-
Commodity contracts3	(114	)	(35)	(298	)	(227	)
Other contracts4	5		(1)	11		1

Total unrealized derivative fair value gain/(loss)	(77	)	352	765		(1,131	)

Reported within Transportation and other services revenues (2016 - $564 million gain; 2015 - $571 million loss) and Other income/(expense) (2016 - $480 million gain; 2015 - $334 million loss) in the Consolidated Statements of Earnings.

Reported as a decrease to Interest expense in the Consolidated Statements of Earnings.

Reported within Transportation and other services revenues (2016 - $2 million gain; 2015 - $5 million gain), Commodity sales (2016 - $302 million loss; 2015 - $357 million loss), Commodity costs (2016 - $6 million gain; 2015 - $118 million gain) and Operating and administrative expense (2016 - $4 million loss; 2015 - $7 million gain) in the Consolidated Statements of Earnings.

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, 2016	December 31, 2015
(millions of Canadian dollars)
Canadian financial institutions	40	47
United States financial institutions	281	450
European financial institutions	107	95
Asian financial institutions	10	4
Other1	356	213

	794	809

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, 2016	Level 1		Level 2		Level 3		Total Gross Derivative Instruments
(millions of Canadian dollars)
Financial assets
Current derivative assets
Foreign exchange contracts	-		97		-		97
Interest rate contracts	-		1		-		1
Commodity contracts	3		119		384		506
Other contracts	-		3		-		3

	3		220		384		607

Long-term derivative assets
Foreign exchange contracts	-		90		-		90
Commodity contracts	-		88		28		116

	-		178		28		206

Financial liabilities
Current derivative liabilities
Foreign exchange contracts	-		(754	)	-		(754	)
Interest rate contracts	-		(946	)	-		(946	)
Commodity contracts	(3	)	(78	)	(396	)	(477	)
Other contracts	-		(1	)	-		(1	)

	(3	)	(1,779	)	(396	)	(2,178	)

Long-term derivative liabilities
Foreign exchange contracts	-		(2,130	)	-		(2,130	)
Interest rate contracts	-		(1,173	)	-		(1,173	)
Commodity contracts	-		(14	)	(192	)	(206	)
Other contracts	-		(5	)	-		(5	)

	-		(3,322	)	(192	)	(3,514	)

Total net financial asset/(liability)
Foreign exchange contracts	-		(2,697	)	-		(2,697	)
Interest rate contracts	-		(2,118	)	-		(2,118	)
Commodity contracts	-		115		(176	)	(61	)
Other contracts	-		(3	)	-		(3	)

	-		(4,703	)	(176	)	(4,879	)

December 31, 2015	Level 1		Level 2		Level 3		Total Gross Derivative Instruments
(millions of Canadian dollars)
Financial assets
Current derivative assets
Foreign exchange contracts	-		10		-		10
Interest rate contracts	-		2		-		2
Commodity contracts	14		210		555		779
Other contracts	-		-		-		-

	14		222		555		791

Long-term derivative assets
Foreign exchange contracts	-		128		-		128
Interest rate contracts	-		18		-		18
Commodity contracts	-		121		106		227
Other contracts	-		-		-		-

	-		267		106		373

Financial liabilities
Current derivative liabilities
Foreign exchange contracts	-		(872	)	-		(872	)
Interest rate contracts	-		(564	)	-		(564	)
Commodity contracts	(3	)	(130	)	(368	)	(501	)
Other contracts	-		(8	)	-		(8	)

	(3	)	(1,574	)	(368	)	(1,945	)

Long-term derivative liabilities
Foreign exchange contracts	-		(3,048	)	-		(3,048	)
Interest rate contracts	-		(629	)	-		(629	)
Commodity contracts	-		(21	)	(239	)	(260	)
Other contracts	-		(13	)	-		(13	)

	-		(3,711	)	(239	)	(3,950	)

Total net financial asset/(liability)
Foreign exchange contracts	-		(3,782	)	-		(3,782	)
Interest rate contracts	-		(1,173	)	-		(1,173	)
Commodity contracts	11		180		54		245
Other contracts	-		(21	)	-		(21	)

	11		(4,796	)	54		(4,731	)

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

June 30, 2016	Fair Value		Unobservable Input	Minimum Price	Maximum Price	Weighted Average Price
(fair value in millions of Canadian dollars)
Commodity contracts - financial1
Natural gas	21		Forward gas price	3.41	4.91	4.10	$/mmbtu3
NGL	10		Forward NGL price	0.31	1.34	0.94	$/gallon
Power	(156	)	Forward power price	27.25	76.42	53.36	$/MWH
Commodity contracts - physical1
Natural gas	(59	)	Forward gas price	2.35	5.00	3.55	$/mmbtu3
Crude	(39	)	Forward crude price	44.26	73.57	61.33	$/barrel
NGL	4		Forward NGL price	0.22	1.87	0.87	$/gallon
Commodity options2
Crude	21		Option volatility	27%	39%	31%
NGL	21		Option volatility	7%	91%	38%
Power	1		Option volatility	24%	42%	25%
	(176	)

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

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

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,
	2016		2015
(millions of Canadian dollars)
Level 3 net derivative asset at beginning of period	54		149
Total loss
Included in earnings1	(96	)	(49	)
Included in OCI	(8	)	(22	)
Settlements	(126	)	(152	)

Level 3 net derivative liability at end of period	(176	)	(74	)

Reported 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.

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