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Risk Management Activities (Tables)

12 Months Ended

Dec. 31, 2018

The Corporation’s outstanding commodity derivative instruments designated as hedging instruments are as follows:



As at Dec. 31	2018		2017
Type (thousands)	Notional amount sold	Notional amount purchased	Notional amount sold	Notional amount purchased
Electricity (MWh)	2,128	—	1,997	44

The Corporation’s outstanding commodity derivative instruments not designated as hedging instruments are as follows:



As at Dec. 31	2018		2017
Type (thousands)	Notional amount sold	Notional amount purchased	Notional amount sold	Notional amount purchased
Electricity (MWh)	58,885	37,023	14,688	7,348
Natural gas (GJ)	80,413	110,488	74,195	103,805
Transmission (MWh)	29	11,163	1	3,455
Emissions (tonnes)	3,134	2,948	516	717

Net Risk Management Assets and Liabilities

Aggregate net risk management assets and (liabilities) are as follows:



As at Dec. 31, 2018
	Cash flow hedges	Not designated as a hedge		Total
Commodity risk management
Current	59	—		59
Long-term	628	(8	)	620
Net commodity risk management assets	687	(8	)	679
Other
Current	—	(3	)	(3	)
Long-term	—	1		1
Net other risk management assets (liabilities)	—	(2	)	(2	)

Total net risk management assets (liabilities)	687	(10	)	677



As at Dec. 31, 2017
	Cash flow hedges	Not designated as a hedge		Total
Commodity risk management
Current	74	7		81
Long-term	636	11		647
Net commodity risk management assets	710	18		728
Other
Current	—	37		37
Long-term	—	(3	)	(3	)
Net other risk management assets (liabilities)	—	34		34

Total net risk management assets (liabilities)	710	52		762



As at Dec. 31		2018			2017
Notional amount sold	Notional amount purchased	Fair value asset (liability)		Maturity	Notional amount purchased	Fair value asset (liability)		Maturity
Foreign exchange forward contracts - foreign-denominated receipts/expenditures
AUD218	CAD205	(5	)	2019-2022	CAD157	(9	)	2018-2021
USD164	CAD214	(7	)	2019-2022	CAD104	11		2018-2021
Foreign exchange forward contracts - foreign-denominated debt
CAD124	USD100	10		2022	USD230	(4	)	2018
Cross currency swaps - foreign-denominated debt
—	—	—			USD270	35		2018

Net Arrangements

Information about the Corporation’s financial assets and liabilities that are subject to enforceable master netting arrangements or similar agreements is as follows:



As at Dec. 31	2018						2017
	Current financial assets	Long-term financial assets	Current financial liabilities		Long-term financial liabilities		Current financial assets		Long-term financial assets	Current financial liabilities		Long-term financial liabilities
Gross amounts recognized	210	666	(121	)	(50	)	281		637	(159	)	(38	)
Gross amounts set-off	—	—	—		—		(43	)	—	43		—
Net amounts as presented in the Consolidated Statements of Financial Position	210	666	(121	)	(50	)	238		637	(116	)	(38	)

Effect of Hedges



Year ended Dec. 31, 2017 (as reported under IAS 39)
			Effective portion			Ineffective portion
Derivatives in cash flow hedging relationships	Pre-tax gain (loss) recognized in OCI		Location of (gain) loss reclassified from OCI	Pre-tax (gain) loss reclassified from OCI		Location of (gain) loss reclassified from OCI	Pre-tax (gain) loss recognized in earnings
Commodity contracts	163		Revenue	(172	)	Revenue	—
			Fuel and purchased power	—		Fuel and purchased power	—
Foreign exchange forwards on commodity contracts	—		Revenue	—		Revenue	—
Foreign exchange forwards on project hedges	(1	)	Property, plant and equipment	—		Foreign exchange (gain) loss	—
Foreign exchange forwards on US debt	—		Foreign exchange (gain) loss	3		Foreign exchange (gain) loss	—
Cross-currency swaps	(26	)	Foreign exchange (gain) loss	24		Foreign exchange (gain) loss	—
Forward starting interest rate swaps	—		Interest expense	7		Interest expense	—
OCI impact	136		OCI impact	(138	)	Net earnings impact	—

The impact of hedged items designated in hedging relationships on OCI and net earnings is:



Year ended Dec. 31, 2018
			Effective portion			Ineffective portion
Derivatives in cash flow hedging relationships	Pre-tax gain (loss) recognized in OCI		Location of (gain) loss reclassified from OCI	Pre-tax (gain) loss reclassified from OCI		Location of (gain) loss reclassified from OCI	Pre-tax (gain) loss recognized in earnings
Commodity contracts	(9	)	Revenue	(67	)	Revenue	—
			Fuel and purchased power	—		Fuel and purchased power	—
Foreign exchange forwards on commodity contracts	—		Revenue	—		Revenue	—
Foreign exchange forwards on project hedges	—		Property, plant and equipment	—		Foreign exchange (gain) loss	—
Foreign exchange forwards on US debt	—		Foreign exchange (gain) loss	3		Foreign exchange (gain) loss	—
Cross-currency swaps	—		Foreign exchange (gain) loss	—		Foreign exchange (gain) loss	—
Forward starting interest rate swaps	—		Interest expense	7		Interest expense	—
OCI impact	(9	)	OCI impact	(57	)	Net earnings impact	—

Currency Rate Risk

The possible effect on net earnings and OCI, due to changes in foreign exchange rates associated with financial instruments denominated in currencies other than the Corporation’s functional currency, is outlined below. The sensitivity analysis has been prepared using management’s assessment that an average four cent (2017 and 2016 - four cent) increase or decrease in these currencies relative to the Canadian dollar is a reasonable potential change over the next quarter.



Year ended Dec. 31	2018			2017			2016
Currency	Net earnings increase (decrease)⁽¹⁾		OCI gain^(1),(2)	Net earnings increase⁽¹⁾		OCI gain^(1),(2)	Net earnings decrease⁽¹⁾		OCI gain^(1),(2)
USD	(13	)	—	(5	)	—	(5	)	—
AUD	(7	)	—	(7	)	—	(7	)	—
Total	(20	)	—	(12	)	—	(12	)	—

(1) These calculations assume an increase in the value of these currencies relative to the Canadian dollar. A decrease would have the opposite effect.

(2) The foreign exchange impact related to financial instruments designated as hedging instruments in net investment hedges has been excluded.

Credit Risk

The following table outlines the Corporation’s maximum exposure to credit risk without taking into account collateral held, including the distribution of credit ratings, as at Dec. 31, 2018:



	Investment grade (Per cent)	Non-investment grade (Per cent)	Total (Per cent)	Total amount
Trade and other receivables⁽¹⁾	86	14	100	731
Long-term finance lease receivables	100	—	100	191
Risk management assets⁽¹⁾	99	1	100	808
Loans and notes receivable⁽²⁾	—	100	100	77
Total				1,807

(1) Letters of credit and cash and cash equivalents are the primary types of collateral held as security related to these amounts.

(2) Includes the promissory note receivable for $25 million (see Note 13), the loan receivable of $37 million and the note receivable for $15 million (see Note 20). The counterparties have no external credit ratings.

Maturity Analysis of Financial Liabilities

A maturity analysis of the Corporation’s financial liabilities is as follows:



	2019		2020		2021		2022	2023	2024 and thereafter	Total
Accounts payable and accrued liabilities	497		—		—		—	—	—	497
Long-term debt⁽¹⁾	130		486		91		947	141	1,439	3,234
Commodity risk management assets	58		89		137		125	113	157	679
Other risk management (assets) liabilities	(3	)	(3	)	(3	)	7	—	—	(2	)
Finance lease obligations	18		16		9		5	5	10	63
Interest on long-term debt and finance lease obligations⁽²⁾	161		152		129		123	84	694	1,343
Dividends payable	58		—		—		—	—	—	58
Total	919		740		363		1,207	343	2,300	5,872

(1) Excludes impact of hedge accounting.

(2) Not recognized as a financial liability on the Consolidated Statements of Financial Position

Hedging Instruments

The impact of the hedging instruments on the statement of financial position is, as follows:



As at Dec. 31, 2018
	Notional amount	Carrying amount	Line item in the statement of financial position	Change in fair value used for measuring ineffectiveness
Commodity price risk
Cash flow hedges
Physical power sales	23 MMWh	687	Risk management assets	60
Foreign currency risk
Net investment hedges
Foreign-denominated debt	USD400	CAD546	Credit facilities, long-term debt and finance lease obligations	41

The impact of the hedged items on the statement of financial position is, as follows:



As at Dec. 31, 2018
	Change in fair value used for measuring ineffectiveness	Cash flow hedge reserve
Commodity price risk
Cash flow hedges
Power forecast sales - Centralia	60	508

	Change in fair value used for measuring ineffectiveness	Foreign currency translation reserve
Net investment hedges
Net investment in foreign subsidiaries	41	84