RISK MANAGEMENT AND FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2022

Risk Management and Financial Instruments [Abstract]

Summary of Derivative Instruments

The fair values and notional amounts for the derivatives designated as a net investment hedge were as follows:

at December 31	2022		2021
	Fair Value1,2	Notional Amount	Fair Value1,2	Notional Amount
(millions of Canadian $, unless otherwise noted)
U.S. dollar foreign exchange options (maturing 2023 to 2024)	(22)	US 3,600	(4)	US 3,800
U.S. dollar cross-currency interest rate swaps (maturing 2023 to 2025)3	(5)	US 300	23	US 400
	(27)	US 3,900	19	US 4,200

1Fair value equals carrying value.

2No amounts have been excluded from the assessment of hedge effectiveness.

3In 2022, Net income includes net realized gains of $1 million (2021 – gains of $1 million) related to the interest component of cross-currency swap settlements which are reported within Interest expense.

The notional amounts and fair value of U.S. dollar-denominated debt designated as a net investment hedge were as follows:

at December 31	2022	2021
(millions of Canadian $, unless otherwise noted)
Notional amount	32,500 (US 24,000)	30,700 (US 24,200)
Fair value	30,800 (US 22,700)	35,500 (US 28,100)

The maturity and notional amount or quantity outstanding related to the Company's derivative instruments excluding hedges of the net investment in foreign operations was as follows:

at December 31, 2022	Power	Natural Gas	Liquids	Foreign Exchange	Interest Rate
Net sales/(purchases)1	673	(96)	11	—	—
Millions of U.S. dollars	—	—	—	5,997	1,600
Millions of Mexican pesos	—	—	—	9,747	—
Maturity dates	2023-2026	2023-2027	2023-2024	2023-2026	2030-2032

1Volumes for power, natural gas and liquids derivatives are in GWh, Bcf and MMBbls, respectively. In 2022, TC Energy updated this presentation to a net basis as it better reflects the Company's trading positions and how it manages its business.

at December 31, 2021	Power	Natural Gas	Liquids	Foreign Exchange	Interest Rate
Net sales/(purchases)1	490	(52)	4	—	—
Millions of U.S. dollars	—	—	—	6,636	650
Millions of Mexican pesos	—	—	—	5,500	—
Maturity dates	2022-2026	2022-2027	2022	2022-2026	2024-2026

1Volumes for power, natural gas and liquids derivatives are in GWh, Bcf and MMBbls, respectively. In 2022, TC Energy updated this presentation to a net basis as it better reflects the Company's trading positions and how it manages its business.

Schedule of Financial Instruments

The following table details the fair value of non-derivative financial instruments, excluding those where carrying amounts approximate fair value, and would be classified in Level II of the fair value hierarchy:

at December 31	2022		2021
	Carrying Amount	Fair Value	Carrying Amount	Fair Value
(millions of Canadian $)
Long-term debt, including current portion (Note 20)1,2	(41,543)	(39,505)	(38,661)	(45,615)
Junior subordinated notes (Note 21)	(10,495)	(9,415)	(8,939)	(9,236)
	(52,038)	(48,920)	(47,600)	(54,851)

1Long-term debt is recorded at amortized cost, except for US$1.6 billion (2021 – nil) that is attributed to hedged risk and recorded at fair value.

2Net income for 2022 included unrealized gains of $64 million (2021 – nil) for fair value adjustments attributable to the hedged interest rate risk associated with interest rate swap fair value hedging relationships on US$1.6 billion of long-term debt at December 31, 2022 (2021 – nil). 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 were classified as available-for-sale assets:

at December 31	2022		2021
	LMCI Restricted Investments	Other Restricted Investments1	LMCI Restricted Investments	Other Restricted Investments1
(millions of Canadian $)
Fair value of fixed income securities2,3
Maturing within 1 year	—	54	—	26
Maturing within 1-5 years	—	106	8	107
Maturing within 5-10 years	1,153	—	1,150	—
Maturing after 10 years	77	—	84	—
Fair value of equity securities2,4	749	—	817	—
	1,979	160	2,059	133

1Other restricted investments have been set aside to fund insurance claim losses to be paid by the Company's wholly-owned captive insurance subsidiary.

2Available-for-sale assets are recorded at fair value and included in Other current assets and Restricted investments on the Company's Consolidated balance sheet.

3Classified in Level II of the fair value hierarchy.

4Classified in Level I of the fair value hierarchy.

The balance sheet classification of the fair value of derivative instruments was as follows:

at December 31, 2022	Cash Flow Hedges	Fair Value Hedges	Net  Investment Hedges	Held for  Trading	Total Fair  Value of Derivative Instruments1
(millions of Canadian $)
Other current assets (Note 8)
Commodities2	—	—	—	597	597
Foreign exchange	—	—	6	11	17
	—	—	6	608	614
Other long-term assets (Note 15)
Commodities2	—	—	—	62	62
Foreign exchange	—	—	2	15	17
Interest rate	—	12	—	—	12
	—	12	2	77	91
Total Derivative Assets	—	12	8	685	705
Accounts payable and other (Note 17)
Commodities2	(72)	—	—	(584)	(656)
Foreign exchange	—	—	(31)	(158)	(189)
Interest rate	—	(26)	—	—	(26)
	(72)	(26)	(31)	(742)	(871)
Other long-term liabilities (Note 18)
Commodities2	(2)	—	—	(75)	(77)
Foreign exchange	—	—	(4)	(20)	(24)
Interest rate	—	(50)	—	—	(50)
	(2)	(50)	(4)	(95)	(151)
Total Derivative Liabilities	(74)	(76)	(35)	(837)	(1,022)
Total Derivatives	(74)	(64)	(27)	(152)	(317)

1Fair value equals carrying value.

2Includes purchases and sales of power, natural gas and liquids.

The balance sheet classification of the fair value of derivative instruments was as follows:

at December 31, 2021	Cash Flow Hedges	Net Investment Hedges	Held for Trading	Total Fair Value of Derivative Instruments1
(millions of Canadian $)
Other current assets (Note 8)
Commodities2	—	—	122	122
Foreign exchange	—	10	37	47
	—	10	159	169
Other long-term assets (Note 15)
Commodities2	—	—	8	8
Foreign exchange	—	32	6	38
Interest rate	2	—	—	2
	2	32	14	48
Total Derivative Assets	2	42	173	217
Accounts payable and other (Note 17)
Commodities2	(23)	—	(138)	(161)
Foreign exchange	—	(4)	(46)	(50)
Interest rate	(10)	—	—	(10)
	(33)	(4)	(184)	(221)
Other long-term liabilities (Note 18)
Commodities2	(4)	—	(6)	(10)
Foreign exchange	—	(19)	(10)	(29)
Interest rate	(8)	—	—	(8)
	(12)	(19)	(16)	(47)
Total Derivative Liabilities	(45)	(23)	(200)	(268)
Total Derivatives	(43)	19	(27)	(51)

1Fair value equals carrying value.

2Includes purchases and sales of power, natural gas and liquids.

Unrealized Gain (Loss) on Investments

year ended December 31	2022		2021		2020
(millions of Canadian $)	LMCI Restricted Investments1	Other Restricted Investments2	LMCI Restricted Investments1	Other Restricted Investments2	LMCI Restricted Investments1	Other Restricted Investments2
Net unrealized (losses)/gains	(244)	(7)	45	(2)	130	1
Net realized (losses)/gains3	(32)	—	3	—	20	1

1Gains 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 records these gains and losses as regulatory assets or regulatory liabilities.

2Gains and losses on other restricted investments are included in Interest income and other in the Company's Consolidated statement of income.

3Realized gains and losses on the sale of LMCI restricted investments are determined using the average cost basis.

Realized Gain (Loss) on Investments

year ended December 31	2022		2021		2020
(millions of Canadian $)	LMCI Restricted Investments1	Other Restricted Investments2	LMCI Restricted Investments1	Other Restricted Investments2	LMCI Restricted Investments1	Other Restricted Investments2
Net unrealized (losses)/gains	(244)	(7)	45	(2)	130	1
Net realized (losses)/gains3	(32)	—	3	—	20	1

1Gains 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 records these gains and losses as regulatory assets or regulatory liabilities.

2Gains and losses on other restricted investments are included in Interest income and other in the Company's Consolidated statement of income.

3Realized gains and losses on the sale of LMCI restricted investments are determined using the average cost basis.

Derivative Instruments - Balance Sheet and Income Statement Information

The following table details amounts recorded on the Consolidated balance sheet in relation to cumulative adjustments for fair value hedges included in the carrying amount of the hedged liabilities:

at December 31	Carrying Amount		Fair Value Hedging Adjustments1
(millions of Canadian $)	2022	2021	2022	2021
Long-term debt	(2,101)	—	64	—

1At December 31, 2022 and 2021, adjustments for discontinued hedging relationships included in these balances were nil.

The following summary does not include hedges of the net investment in foreign operations:

year ended December 31	2022	2021	2020
(millions of Canadian $)
Derivative Instruments Held For Trading1
Amount of unrealized gains/(losses) in the year
Commodities	14	9	(23)
Foreign exchange (Note 22)	(149)	(203)	126
Amount of realized gains/(losses) in the year
Commodities	759	287	183
Foreign exchange (Note 22)	(2)	240	(33)
Derivative Instruments in Hedging Relationships2
Amount of realized (losses)/gains in the year
Commodities	(73)	(44)	6
Interest rate	(3)	(32)	(16)

1Realized and unrealized gains and losses on held-for-trading derivative instruments used to purchase and sell commodities are included on a net basis in Revenues. Realized and unrealized gains and losses on foreign exchange held-for-trading derivative instruments are included on a net basis in Foreign exchange (loss)/gain, net.

2In 2022, 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 (2021 – realized loss of $10 million, 2020 – nil).

The following table details amounts presented in the Consolidated statement of income in which the effects of fair value or cash flow hedging relationships were recorded:

year ended December 31	2022	2021	2020
(millions of Canadian $)
Fair Value Hedges
Interest rate contracts1
Hedged items	(30)	—	(3)
Derivatives designated as hedging instruments	(1)	—	1
Cash Flow Hedges
Reclassification of losses on derivative instruments from AOCI to Net income2,3
Commodity contracts4	(47)	(22)	(1)
Interest rate contracts1	(16)	(46)	(648)

1Presented within Interest expense in the Consolidated statement of income, except for a loss of $613 million recorded in May 2020 related to a contractually required derivative instrument used to hedge the interest rate risk associated with project-level financing for the Coastal GasLink construction. This derivative instrument was derecognized as part of the sale of a 65 per cent equity interest in Coastal GasLink LP. The loss was included in Net gain/(loss) on sale of assets. Refer to Note 30, Acquisitions and dispositions, for additional information.

2Refer to Note 26, Other comprehensive income/(loss) and accumulated other comprehensive income/(loss), for the components of OCI related to derivatives in cash flow hedging relationships including the portion attributable to non-controlling interests.

3There are no amounts recognized in earnings that were excluded from effectiveness testing.

4Presented within Revenues (Power and Energy Solutions) in the Consolidated statement of income.

Schedule of Components of OCI related to Derivatives in Cash Flow Hedging Relationships

The components of OCI (Note 26) related to the change in fair value of derivatives in cash flow hedging relationships before tax and including the portion attributable to non-controlling interests were as follows:

year ended December 31	2022	2021	2020
(millions of Canadian $, pre-tax)
Change in fair value of derivative instruments recognized in OCI1
Commodities	(94)	(35)	(5)
Interest rate	36	22	(766)
	(58)	(13)	(771)

1No amounts have been excluded from the assessment of hedge effectiveness. Amounts in parentheses indicate losses recorded to OCI and AOCI.

Schedule of Offsetting Assets

The following tables show 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, 2022	Gross Derivative Instruments	Amounts Available for Offset1	Net Amounts
(millions of Canadian $)
Derivative Instrument Assets
Commodities	659	(591)	68
Foreign exchange	34	(33)	1
Interest rate	12	(4)	8
	705	(628)	77
Derivative Instrument Liabilities
Commodities	(733)	591	(142)
Foreign exchange	(213)	33	(180)
Interest rate	(76)	4	(72)
	(1,022)	628	(394)

1Amounts available for offset do not include cash collateral pledged or received.

at December 31, 2021	Gross Derivative Instruments	Amounts Available for Offset1	Net Amounts
(millions of Canadian $)
Derivative Instrument Assets
Commodities	130	(91)	39
Foreign exchange	85	(54)	31
Interest rate	2	(1)	1
	217	(146)	71
Derivative Instrument Liabilities
Commodities	(171)	91	(80)
Foreign exchange	(79)	54	(25)
Interest rate	(18)	1	(17)
	(268)	146	(122)

1Amounts available for offset do not include cash collateral pledged or received.

Schedule of Offsetting Liabilities

The following tables show 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, 2022	Gross Derivative Instruments	Amounts Available for Offset1	Net Amounts
(millions of Canadian $)
Derivative Instrument Assets
Commodities	659	(591)	68
Foreign exchange	34	(33)	1
Interest rate	12	(4)	8
	705	(628)	77
Derivative Instrument Liabilities
Commodities	(733)	591	(142)
Foreign exchange	(213)	33	(180)
Interest rate	(76)	4	(72)
	(1,022)	628	(394)

1Amounts available for offset do not include cash collateral pledged or received.

at December 31, 2021	Gross Derivative Instruments	Amounts Available for Offset1	Net Amounts
(millions of Canadian $)
Derivative Instrument Assets
Commodities	130	(91)	39
Foreign exchange	85	(54)	31
Interest rate	2	(1)	1
	217	(146)	71
Derivative Instrument Liabilities
Commodities	(171)	91	(80)
Foreign exchange	(79)	54	(25)
Interest rate	(18)	1	(17)
	(268)	146	(122)

1Amounts 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, were categorized as follows:

at December 31, 2022	Quoted Prices in Active Markets (Level I)	Significant Other Observable Inputs  (Level II)1	Significant Unobservable Inputs (Level III)1	Total
(millions of Canadian $)
Derivative Instrument Assets
Commodities	515	142	2	659
Foreign exchange	—	34	—	34
Interest rate	—	12	—	12
Derivative Instrument Liabilities
Commodities	(478)	(242)	(13)	(733)
Foreign exchange	—	(213)	—	(213)
Interest rate	—	(76)	—	(76)
	37	(343)	(11)	(317)

1There were no transfers from Level II to Level III for the year ended December 31, 2022.

at December 31, 2021	Quoted Prices in Active Markets (Level I)	Significant Other Observable Inputs (Level II)1	Significant Unobservable Inputs (Level III)1	Total
(millions of Canadian $)
Derivative Instrument Assets
Commodities	39	91	—	130
Foreign exchange	—	85	—	85
Interest rate	—	2	—	2
Derivative Instrument Liabilities
Commodities	(49)	(116)	(6)	(171)
Foreign exchange	—	(79)	—	(79)
Interest rate	—	(18)	—	(18)
	(10)	(35)	(6)	(51)

1There were no transfers from Level II to Level III for the year ended December 31, 2021.

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 in Level III of the fair value hierarchy:

(millions of Canadian $, pre-tax)	2022	2021
Balance at beginning of year	(6)	(4)
Net losses included in Net income	(10)	(3)
Net losses included in OCI	(3)	—
Transfers out of Level III	7	—
Settlements	1	1
Balance at End of Year1	(11)	(6)

1Revenues include unrealized losses of $10 million attributed to derivatives in the Level III category that were still held at December 31, 2022 (2021 – unrealized losses of $3 million).