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Derivative Instruments and Hedging Activities (Tables)

12 Months Ended

Dec. 31, 2012

Commitment of Foreign Currency Forward Contracts

As at December 31, 2012, the Company was committed to the following foreign currency forward contracts:


					Fair Value /Carrying Amount
	Contract Amount in Foreign Currency (millions)		Average Forward Rate⁽¹⁾		of Asset (Liability)					Expected Maturity
					Hedge		Non-hedge			2013
					$		$			$
					(in millions of U.S. Dollars)					(in millions of U.S. Dollars)
Norwegian Kroner		201.0		5.93		—		2.1			33.9
Euro		9.8		0.76		—		(0.1	)		13.0
Canadian Dollar		9.3		1.01		0.2		—			9.2
British Pound		11.3		0.64		0.3		0.4			17.6

						0.5		2.4			73.7

(1)	Average contractual exchange rate represents the contracted amount of foreign currency one U.S. Dollar will buy.

Commitment of Cross Currency Swaps

As at December 31, 2012, the Company was committed to the following cross currency swaps:


	Notional Amount		Notional Amount		Floating Rate Receivable					Floating Rate Payable								Fair Value / Carrying Amount of Asset /
Maturity	Notional Amount		Notional Amount		Reference					Reference					Fixed Rate			Fair Value / Carrying Amount of Asset /
Date	NOK		USD		Rate		Margin			Rate		Margin			Payable			Liability
2013		600,000		98,500		NIBOR		4.75	%		LIBOR		5.04	%			⁽¹⁾		9,890
2015		700,000		122,800		NIBOR		4.75	%							5.52	%		3,075
2017		600,000		101,400		NIBOR		5.75	%							7.49	%		3,545
2017		700,000		125,000		NIBOR		5.25	%							6.88	%		(2,624	)

																			13,886

(1)	LIBOR subsequently fixed at 1.1%, subject to a LIBOR rate receivable cap of 3.5% (see next section).

Interest Rate Swap Agreements

As at December 31, 2012, the Company was committed to the following interest rate swap agreements related to its LIBOR-based debt, restricted cash deposits and EURIBOR-based debt, whereby certain of the Company’s floating-rate debt and restricted cash deposits were swapped with fixed-rate obligations or fixed-rate deposits:


	Interest Rate Index		Principal Amount $		Fair Value / Carrying Amount of Asset / (Liability) $			Weighted- Average Remaining Term (years)		Fixed Interest Rate (%) ⁽¹⁾
LIBOR-Based Debt:
U.S. Dollar-denominated interest rate swaps ⁽²⁾		LIBOR		412,880		(110,590	)		24.1		4.9
U.S. Dollar-denominated interest rate swaps ⁽³⁾		LIBOR		3,170,273		(515,124	)		7.9		4.1
U.S. Dollar-denominated interest rate swaps ⁽⁴⁾		LIBOR		98,500		(782	)		0.9		1.1
LIBOR-Based Restricted Cash Deposit:
U.S. Dollar-denominated interest rate swaps ⁽²⁾		LIBOR		469,260		165,688			24.1		4.8
EURIBOR-Based Debt:
Euro-denominated interest rate swaps ^(5) (6)		EURIBOR		341,382		(41,329	)		11.5		3.1

				4,492,295		(502,137	)

(1)	Excludes the margins the Company pays on its variable-rate debt, which, as of December 31, 2012, ranged from 0.3% to 4.25%.

(2)	Principal amount reduces quarterly.

(3)	Principal amount of $200 million is fixed at 2.14%, unless LIBOR exceeds 6%, in which case the Company pays a floating rate of interest.

(4)	The floating LIBOR rate receivable is capped at 3.5%, which effectively results in a fixed rate of 1.12% unless LIBOR exceeds 3.5%, in which case the Company’s related interest rate effectively floats at LIBOR reduced by 2.38%.

(5)	Principal amount reduces monthly to 70.1 million Euros ($92.5 million) by the maturity dates of the swap agreements.

(6)	Principal amount is the U.S. Dollar equivalent of 258.8 million Euros.

Location and Fair Value Amounts of Derivative Instruments

The following table presents the location and fair value amounts of derivative instruments, segregated by type of contract, on the Company’s consolidated balance sheets.


	Current							Current
	Portion of							Portion of
	Derivative		Derivative		Accrued			Derivative			Derivative
	Assets		Assets		Liabilities			Liabilities			Liabilities
As at December 31, 2012
Derivatives designated as a cash flow hedge:
Foreign currency contracts		441		—		—			(1	)		—
Derivatives not designated as a cash flow hedge:
Foreign currency contracts		2,506		—		—			(60	)		—
Interest rate swap agreements		16,927		144,247		(22,312	)		(115,774	)		(525,225	)
Cross currency swap agreements		11,795		4,334		719			—			(2,962	)

		31,669		148,581		(21,593	)		(115,835	)		(528,187	)

As at December 31, 2011
Derivatives designated as a cash flow hedge:
Foreign currency contracts		1,551		28		—			(1,192	)		(264	)
Derivatives not designated as a cash flow hedge:
Foreign currency contracts		2,592		3		—			(6,248	)		(832	)
Interest rate swap agreements		15,608		139,651		(24,750	)		(109,897	)		(568,446	)
Cross currency swap agreements		1,576		875		225			—			—
Foinaven embedded derivative		3,385		—		—			—			—

		24,712		140,557		(24,525	)		(117,337	)		(569,542	)

Effective Portion of Gains (Losses) on Foreign Currency Contracts

For the periods indicated, the following table presents the effective portion of gains (losses) on foreign currency contracts designated and qualifying as cash flow hedges that was recognized in (1) accumulated other comprehensive income (loss) (or AOCI), (2) recorded in accumulated other comprehensive income (loss) during the term of the hedging relationship and reclassified to earnings, and (3) the ineffective portion of gains (losses) on derivative instruments designated and qualifying as cash flow hedges.


Year Ended December 31, 2012							Year Ended December 31, 2011
Balance Sheet (AOCI)	Statement of Loss						Balance Sheet (AOCI)		Statement of Loss
Effective Portion	Effective		Ineffective Portion				Effective Portion		Effective Portion		Ineffective Portion
2,412		—		—		Vessel operating expenses		2,007		918		(568	)	Vessel operating expenses
		1,436		(660	)	General and administrative expenses				4,636		(223	)	General and administrative expenses

2,412		1,436		(660	)			2,007		5,554		(791	)


Year Ended December 31, 2010
Balance Sheet (AOCI)		Statement of Loss
Effective Portion		Effective Portion			Ineffective Portion
Effective Portion		Effective Portion
	(3,559)		(680	)		(3,473	)	Vessel operating expenses
			(2,360	)		(1,402	)	General and administrative expenses

	(3,559)		(3,040	)		(4,875	)

Effect of (Loss) Gain on Derivatives Not Designated as Hedging Instruments

The effect of the (loss) gain on derivatives not designated as hedging instruments in the statements of loss are as follows:


	Year Ended			Year Ended			Year Ended
	December 31,			December 31,			December 31,
	2012			2011			2010
	$			$			$
Realized (losses) gains relating to:
Interest rate swap agreements		(123,277	)		(132,931	)		(154,098	)
Interest rate swap agreement amendments		—			(149,666	)		—
Foreign currency forward contracts		1,155			9,965			(2,274	)
Forward freight agreements and bunker fuel swap contracts		—			36			(7,914	)
Foinaven embedded derivative		11,452			—			—

		(110,670	)		(272,596	)		(164,286	)

Unrealized gains (losses) relating to:
Interest rate swap agreements		26,770			(58,405	)		(146,780	)
Foreign currency forward contracts		6,933			(11,399	)		6,307
Forward freight agreements and bunker fuel swap contracts		—			—			(108	)
Foinaven embedded derivative		(3,385	)		(322	)		5,269

		30,318			(70,126	)		(135,312	)

Total realized and unrealized losses on derivative instruments		(80,352	)		(342,722	)		(299,598	)

Effect of Gain (Loss) on Cross Currency Swaps

Realized and unrealized gains (losses) of the cross currency swaps are recognized in earnings and reported in foreign currency exchange gain (loss) in the consolidated statements of loss. The effect of the gain (loss) on cross currency swaps on the consolidated statements of loss is as follows:


	Year Ended December 31,
	2012		2011			2010
	$		$			$
Realized gains		3,628		2,881			198
Unrealized gains (losses)		10,715		(1,583	)		4,034

Total realized and unrealized gains on cross currency swaps		14,343		1,298			4,232

- Definition

Tabular disclosure of the location and amount of gains and losses reported in the statement of financial performance, or when applicable, the statement of financial position. For example, (a) gains and losses recognized in the income statement on derivative instruments designated and qualifying as hedging instruments in fair value hedges and related hedged items designated and qualifying in fair value hedges and (b) gains and losses initially recognized in other comprehensive income on derivative instruments designated and qualifying as cash flow hedges.

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