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RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (Tables)
 12 Months Ended
Dec. 31, 2015
Derivative financial instruments  
Schedule of Financial Instruments
The balance sheet classification of the fair value of the derivative instruments as at December 31, 2015 is as follows:
at December 31, 2015
Cash Flow Hedges1

 
Fair Value Hedges1

 
Net Investment Hedges1

 
Held for Trading1

 
Total Fair Value of Derivative Instruments

(millions of Canadian $)
 
 
 
 
 
 
 
 
 
 
Other current assets (Note 5)
 
 
 
 
 
 
 
 
 
Commodities2
46

 
—

 
—

 
326

 
372

Foreign exchange
—

 
—

 
65

 
2

 
67

Interest rate
—

 
1

 
—

 
2

 
3

 
46

 
1

 
65

 
330

 
442

Intangible and other assets (Note 11)
 
 
 
 
 
 
 
 
 
Commodities2
11

 
—

 
—

 
126

 
137

Foreign exchange
—

 
—

 
29

 
—

 
29

Interest rate
—

 
2

 
—

 
—

 
2

 
11

 
2

 
29

 
126

 
168

Total Derivative Assets
57

 
3

 
94

 
456

 
610

 
 
 
 
 
 
 
 
 
 
Accounts payable and other (Note 13)
 
 
 
 
 
 
 
 
 
Commodities2
(112
)
 
—

 
—

 
(443
)
 
(555
)
Foreign exchange
—

 
—

 
(313
)
 
(54
)
 
(367
)
Interest rate
(1
)
 
(1
)
 
—

 
(2
)
 
(4
)
 
(113
)
 
(1
)
 
(313
)
 
(499
)
 
(926
)
Other long-term liabilities (Note 14)
 
 
 
 
 
 
 
 
 
Commodities2
(31
)
 
—

 
—

 
(131
)
 
(162
)
Foreign exchange
—

 
—

 
(461
)
 
—

 
(461
)
Interest rate
(1
)
 
(1
)
 
—

 
—

 
(2
)
 
(32
)
 
(1
)
 
(461
)
 
(131
)
 
(625
)
Total Derivative Liabilities
(145
)
 
(2
)
 
(774
)
 
(630
)
 
(1,551
)
1 
Fair value equals carrying value.
2 
Includes purchases and sales of power and natural gas.
The balance sheet classification of the fair value of the derivative instruments as at December 31, 2014 is as follows:
at December 31, 2014
Cash Flow Hedges1

 
Fair Value Hedges1

 
Net Investment Hedges1

 
Held for Trading1

 
Total Fair Value of Derivative Instruments

(millions of Canadian $)
 
 
 
 
 
 
 
 
 
 
Other current assets (Note 5)
 
 
 
 
 
 
 
 
 
Commodities2
39

 
—

 
—

 
359

 
398

Foreign exchange
—

 
—

 
5

 
1

 
6

Interest rate
—

 
2

 
—

 
3

 
5

 
39

 
2

 
5

 
363

 
409

Intangible and other assets (Note 11)
 
 
 
 
 
 
 
 
 
Commodities2
18

 
—

 
—

 
72

 
90

Foreign exchange
—

 
—

 
1

 
—

 
1

Interest rate
—

 
1

 
—

 
1

 
2

 
18

 
1

 
1

 
73

 
93

Total Derivative Assets
57

 
3

 
6

 
436

 
502

 
 
 
 
 
 
 
 
 
 
Accounts payable and other (Note 13)
 
 
 
 
 
 
 
 
 
Commodities2
(136
)
 
—

 
—

 
(422
)
 
(558
)
Foreign exchange
—

 
—

 
(155
)
 
(32
)
 
(187
)
Interest rate
(1
)
 
—

 
—

 
(3
)
 
(4
)
 
(137
)
 
—

 
(155
)
 
(457
)
 
(749
)
Other long-term liabilities (Note 14)
 
 
 
 
 
 
 
 
 
Commodities2
(27
)
 
—

 
—

 
(72
)
 
(99
)
Foreign exchange
—

 
—

 
(310
)
 
—

 
(310
)
Interest rate
(1
)
 
—

 
—

 
(1
)
 
(2
)
 
(28
)
 
—

 
(310
)
 
(73
)
 
(411
)
Total Derivative Liabilities
(165
)
 
—

 
(465
)
 
(530
)
 
(1,160
)
1 
Fair value equals carrying value.
2 
Includes purchases and sales of power and natural gas.
The following table details the fair value of the non-derivative financial instruments, excluding those where carrying amounts approximate fair value, and would be classified in Level II of the fair value hierarchy:
 
2015
 
2014
at December 31
Carrying
Amount

 
Fair
Value

 
Carrying
Amount

 
Fair
Value

(millions of Canadian $)
 
 
 
 
 
 
 
 
Notes receivable1
214

 
265

 
213

 
263

Current and Long-term debt2,3 (Note 16)
(31,584
)
 
(34,309
)
 
(24,757
)
 
(28,713
)
Junior subordinated notes (Note 17)
(2,422
)
 
(2,011
)
 
(1,160
)
 
(1,157
)
 
(33,792
)
 
(36,055
)
 
(25,704
)
 
(29,607
)
1 
Notes receivable are included in Other current assets and Intangible and other assets on the Consolidated balance sheet.
2 
Long-term debt is recorded at amortized cost, except for US$850 million (2014 – US$400 million) that is attributed to hedged risk and recorded at fair value.
3 
Consolidated Net income in 2015 included gains of $2 million (2014 – losses of $3 million) for fair value adjustments attributable to the hedged interest rate risk associated with interest rate swap fair value hedging relationships on US$850 million of Long-term debt at December 31, 2015 (2014 – US$400 million). There were no other unrealized gains or losses from fair value adjustments to the non-derivative financial instruments.
Available for Sale Assets Summary
The following tables summarize additional information about the Company's restricted investments that are classified as available for sale assets:
 
2015
 
2014
at December 31
LMCI Restricted Investments1

 
Other Restricted Investments2

 
LMCI Restricted Investments1

 
Other Restricted Investments2

(millions of Canadian $)
 
 
 
 
 
 
 
 
Fair values
 
 
 
 
 
 
 
Fixed income securities (maturing within 5 years)
—

 
90

 
—

 
75

Fixed income securities (maturing after 10 years)
261

 
—

 
—

 
—

 
261

 
90

 
—

 
75

1 
Gains and losses arising from changes in the fair value of LMCI restricted investments impact the subsequent amounts to be collected through tolls to cover future pipeline abandonment costs. As a result, the Company would record these gains and losses as regulatory assets or liabilities. In 2015 and 2014, there were no net realized or unrealized gains or losses on LMCI restricted investments.
2 
Other restricted investments have been set aside to fund insurance claim losses to be paid by the Company's wholly-owned captive insurance subsidiary. In 2015 and 2014, there were no net realized or unrealized gains or losses on other restricted investments.
Summary of Derivative Instruments
The following tables present the maturity and notional principal or quantity outstanding related to the Company's derivative instruments excluding hedges of the net investment in foreign operations:
at December 31, 2015
Power

 
Natural Gas

 
Foreign Exchange

 
Interest

 
 
 
 
 
 
 
 
Purchases1
70,331

 
133

 
—

 
—

Sales1
54,382

 
70

 
—

 
—

Millions of dollars
—

 
—

 
US 1,476

 
US 1,100

Maturity dates
2016–2020

 
2016–2020

 
2016

 
2016–2019

1 
Volumes for power and natural gas derivatives are in GWh and Bcf, respectively.
at December 31, 2014
Power

 
Natural Gas

 
Foreign Exchange

 
Interest

 
 
 
 
 
 
 
 
Purchases1
53,217

 
60

 
—

 
—

Sales1
39,429

 
38

 
—

 
—

Millions of dollars
—

 
—

 
US 1,374

 
US 650

Maturity dates
2015–2019

 
2015–2020

 
2015

 
2015–2018

1 
Volumes for power and natural gas derivatives are in GWh and Bcf, respectively.
Summary of Unrealized and Realized Gains/(Losses) of Derivative Instruments
The following summary does not include hedges of the net investment in foreign operations.
year ended December 31
2015

 
2014

(millions of Canadian $)
 
 
 
 
Derivative instruments held for trading1
 
 
 
Amount of unrealized losses in the year
 
 
 
Commodities
(37
)
 
(40
)
Foreign exchange
(21
)
 
(20
)
Amount of realized losses in the year
 
 
 
Commodities
(151
)
 
(28
)
Foreign exchange
(112
)
 
(28
)
Derivative instruments in hedging relationships2,3
 
 
 
Amount of realized (losses)/gains in the year
 
 
 
Commodities
(179
)
 
130

Interest rate
8

 
4

1 
Realized and unrealized gains and losses on held for trading derivative instruments used to purchase and sell commodities are included net in Revenues. Realized and unrealized gains and losses on interest rate and foreign exchange derivative instruments held for trading are included net in Interest expense and Interest income and other, respectively.
2 
In 2015, net realized gains on fair value hedges were $11 million (2014 – gains of $7 million) and were included in Interest expense.
3 
In 2015 and 2014, there were no gains or losses included in Net Income relating to discontinued cash flow hedges where it was probable that the anticipated transaction would not occur.
Schedule of Components of OCI related to Derivatives in Cash Flow Hedging Relationships
The components of OCI (Note 21) related to derivatives in cash flow hedging relationships are as follows:
year ended December 31
2015

 
2014

(millions of Canadian $, pre-tax)
 
 
 
 
Change in fair value of derivative instruments recognized in OCI (effective portion)1
 
 
 
Commodities
(92
)
 
(128
)
Foreign exchange
—

 
10

 
(92
)
 
(118
)
Reclassification of gains/(losses) on derivative instruments from AOCI to Net income (effective portion)1
 
 
 
Commodities2
128

 
(111
)
Interest rate3
16

 
16

 
144

 
(95
)
Losses on derivative instruments recognized in Net income (ineffective portion)
 
 
 
Commodities2
—

 
(13
)
1 
No amounts have been excluded from the assessment of hedge effectiveness. Amounts in parentheses indicate losses recorded to OCI.
2 
Reported within Revenues on the Consolidated statement of income.
3 
Reported within Interest expense on the Consolidated statement of income.
Schedule of Offsetting Assets
The following table shows the impact on the presentation of the fair value of derivative instrument assets and liabilities had the Company elected to present these contracts on a net basis:
at December 31, 2015
Gross Derivative Instruments Presented on the Balance Sheet

 
Amounts Available for Offset1

 
Net Amounts

(millions of Canadian $)
 
 
 
 
 
 
Derivative - Asset
 
 
 
 
 
Commodities
509

 
(418
)
 
91

Foreign exchange
96

 
(93
)
 
3

Interest rate
5

 
(1
)
 
4

 
610

 
(512
)
 
98

Derivative - Liability
 
 
 
 
 
Commodities
(717
)
 
418

 
(299
)
Foreign exchange
(828
)
 
93

 
(735
)
Interest rate
(6
)
 
1

 
(5
)
 
(1,551
)
 
512

 
(1,039
)
1 
Amounts available for offset do not include cash collateral pledged or received.
The following table shows the impact on the presentation of the fair value of derivative instrument assets and liabilities had the Company elected to present these contracts on a net basis as at December 31, 2014:
at December 31, 2014
Gross Derivative Instruments Presented on the Balance Sheet

 
Amounts Available for Offset1

 
Net Amounts

(millions of Canadian $)
 
 
 
 
 
 
Derivative - Asset
 
 
 
 
 
Commodities
488

 
(387
)
 
101

Foreign exchange
7

 
(7
)
 
—

Interest rate
7

 
(1
)
 
6

 
502

 
(395
)
 
107

Derivative - Liability
 
 
 
 
 
Commodities
(657
)
 
387

 
(270
)
Foreign exchange
(497
)
 
7

 
(490
)
Interest rate
(6
)
 
1

 
(5
)
 
(1,160
)
 
395

 
(765
)
1 
Amounts available for offset do not include cash collateral pledged or received.
Schedule of Offsetting Liabilities
The following table shows the impact on the presentation of the fair value of derivative instrument assets and liabilities had the Company elected to present these contracts on a net basis:
at December 31, 2015
Gross Derivative Instruments Presented on the Balance Sheet

 
Amounts Available for Offset1

 
Net Amounts

(millions of Canadian $)
 
 
 
 
 
 
Derivative - Asset
 
 
 
 
 
Commodities
509

 
(418
)
 
91

Foreign exchange
96

 
(93
)
 
3

Interest rate
5

 
(1
)
 
4

 
610

 
(512
)
 
98

Derivative - Liability
 
 
 
 
 
Commodities
(717
)
 
418

 
(299
)
Foreign exchange
(828
)
 
93

 
(735
)
Interest rate
(6
)
 
1

 
(5
)
 
(1,551
)
 
512

 
(1,039
)
1 
Amounts available for offset do not include cash collateral pledged or received.
The following table shows the impact on the presentation of the fair value of derivative instrument assets and liabilities had the Company elected to present these contracts on a net basis as at December 31, 2014:
at December 31, 2014
Gross Derivative Instruments Presented on the Balance Sheet

 
Amounts Available for Offset1

 
Net Amounts

(millions of Canadian $)
 
 
 
 
 
 
Derivative - Asset
 
 
 
 
 
Commodities
488

 
(387
)
 
101

Foreign exchange
7

 
(7
)
 
—

Interest rate
7

 
(1
)
 
6

 
502

 
(395
)
 
107

Derivative - Liability
 
 
 
 
 
Commodities
(657
)
 
387

 
(270
)
Foreign exchange
(497
)
 
7

 
(490
)
Interest rate
(6
)
 
1

 
(5
)
 
(1,160
)
 
395

 
(765
)
1 
Amounts available for offset do not include cash collateral pledged or received.
Schedule of Fair Value of Assets and Liabilities Measured on a Recurring Basis
The fair value of the Company's derivative assets and liabilities measured on a recurring basis, including both current and non-current portions for 2015, are categorized as follows:
at December 31, 2015
Quoted Prices in Active Markets
Level I1

 
Significant Other Observable Inputs Level II1

 
Significant Unobservable Inputs
Level III1

 
Total

(millions of Canadian $)
 
 
 
 
 
 
 
 
Derivative Instrument Assets:
 
 
 
 
 
 
 
Commodities
34

 
462

 
13

 
509

Foreign exchange
—

 
96

 
—

 
96

Interest rate
—

 
5

 
—

 
5

Derivative Instrument Liabilities:
 
 
 
 
 
 
 
Commodities
(102
)
 
(611
)
 
(4
)
 
(717
)
Foreign exchange
—

 
(828
)
 
—

 
(828
)
Interest rate
—

 
(6
)
 
—

 
(6
)
 
(68
)
 
(882
)
 
9

 
(941
)
1 
There were no transfers from Level I to Level II or from Level II to Level III for the year ended December 31, 2015.
The fair value of the Company's derivative assets and liabilities measured on a recurring basis, including both current and non-current portions for 2014, are categorized as follows:
at December 31, 2014
Quoted Prices in Active Markets
Level I1

 
Significant Other Observable Inputs Level II1

 
Significant Unobservable Inputs
Level III1

 
Total

(millions of Canadian $)
 
 
 
 
 
 
 
 
Derivative Instrument Assets:
 
 
 
 
 
 
 
Commodities
40

 
441

 
7

 
488

Foreign exchange
—

 
7

 
—

 
7

Interest rate
—

 
7

 
—

 
7

Derivative Instrument Liabilities:
 
 
 
 
 
 
 
Commodities
(86
)
 
(568
)
 
(3
)
 
(657
)
Foreign exchange
—

 
(497
)
 
—

 
(497
)
Interest rate
—

 
(6
)
 
—

 
(6
)
 
(46
)
 
(616
)
 
4

 
(658
)
1 
There were no transfers from Level I to Level II or from Level II to Level III for the year ended December 31, 2014.
Schedule of Net Change in the Level III Fair Value Category
The following table presents the net change in fair value of derivative assets and liabilities classified as Level III of the fair value hierarchy:
(millions of Canadian $, pre-tax)
2015

 
2014

 
 
 
 
Balance at beginning of year
4

 
1

Transfers out of Level III
5

 
—

Total gains included in Net income
3

 
3

Sales
(2
)
 
—

Settlements
(1
)
 
—

Balance at end of year1
9

 
4

1 
Revenues include unrealized gains attributed to derivatives in the Level III category that were still held at December 31, 2015 of $7 million (2014 – $3 million).
Designated as a net investment hedge  
Derivative financial instruments  
Summary of Derivative Instruments
U.S. Dollar-Denominated Debt Designated as a Net Investment Hedge
at December 31
 
2015
 
2014
(millions of Canadian $, unless otherwise noted)
 
 
 
 
 
 
Carrying value
 
23,000 (US 16,600)
 
17,000 (US 14,700)
Fair value
 
23,800 (US 17,200)
 
19,000 (US 16,400)

Derivatives Designated as a Net Investment Hedge
 
2015
 
2014
at December 31
Fair
Value1

 
Notional or
Principal
Amount

 
Fair
Value1

 
Notional or
Principal
Amount

(millions of Canadian $, unless otherwise noted)
 
 
 
 
 
 
 
 
U.S. dollar cross-currency interest rate swaps (maturing 2016 to 2019)2
(730
)
 
            US
3,150

 
(431
)
 
            US
2,900

U.S. dollar foreign exchange forward contracts (maturing 2016 to 2017)
50

 
            US
1,800

 
(28
)
 
            US
1,400

 
(680
)
 
            US
4,950

 
(459
)
 
            US
4,300

1 
Fair values equal carrying values.
2 
In 2015, net realized gains of $8 million (2014 – gains of $21 million) related to the interest component of cross-currency swap settlements are included in Interest expense.