14. Financial risk management (continued)
b. Liquidity risk
Liquidity risk is the risk that the Corporation is unable to meet its financial obligations as they become due. The Corporation has credit facilities available to refinance maturities in excess of anticipated operating cash flows. The contractual maturities of the Corporation’s financial obligations, including interest payments and the impact of netting agreements, as at June 30, 2020 were as follows:
Contractual Maturities
Carrying Less Than
1 - 2
3 - 5
More Than
(millions)
Amount
1 Year
Years
Years
5 Years
Short-term debt
$
150
$
150
$
- -
$
- -
$
- - -
Trade and other payables
89 13
89
Lease liability Long-term debt
7
3
3
1,494
87 10 97
52
254
1,978
Derivative instruments
3
(9)
(7)
- -
Commitments
97
-
-
$
1,846
$
440
$
46
$
250
$
1,978
At period end, the Corporation’s borrowing capacity, together with stable operating cash flows, provide sufficient liquidity to fund these contractual obligations. Interest rates used in calculating financial obligations are effective June 30, 2020. In addition to the above, the Corporation has posted a $15 million (March 31, 2020 - $15 million) letter of credit with ICE NGX as security for natural gas purchases and sales conducted by the Corporation on the ICE NGX natural gas exchange in Alberta. ICE NGX may draw upon the letter of credit if the Corporation fails to make timely payment for, or delivery of, natural gas as per the related contract.
c.
Credit risk
Credit risk is the risk of financial loss if a customer or counterparty to a financial or derivative instrument fails to meet its contractual obligations. The Corporation is exposed to credit risk through cash, trade and other receivables, debt retirement funds and derivative instrument assets. Credit risk related to cash and debt retirement funds is minimized by dealing with institutions that have strong credit ratings and holding highly-rated financial securities. The Corporation extends credit to its customers in the normal course of business and is at risk of loss in the event of non-performance by counterparties on certain of the financial and derivative instruments. To reduce its credit risk, the Corporation has established policies and procedures to monitor and limit the amount of credit extended to its customers and counterparties and may require letters of credit and other forms of security.
2020-21 First Quarter Report
29
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