Notes to the Consolidated Financial Statements
Based on the period closing positions, an increase of $1.00 per GJ in natural gas prices would have a positive impact on uncontracted natural gas in storage, by $nil (2020 - $5 million). Conversely, a decrease of $1.00 per GJ would have a negative impact on unsold natural gas in storage, by $2 million (2020 - $5 million). b. Interest rate risk The Corporation’s significant interest-bearing financial instruments are short-term variable rate debt and long-term fixed rate debt. Consequently, the Corporation is subject to interest rate risk on outstanding short-term debt balances as well as on future short- and long-term borrowings. Interest rate risk is managed by adjusting the relative levels of short and long-term debt depending on current market conditions. The Corporation monitors long-term debt levels by maintaining an industry-comparable long-term debt to long-term capital requirements ratio. The Corporation forecasts its borrowing requirements annually and develops financing strategies and target rates for interest rate risk management activities. As at March 31, 2021, the Corporation had $264 million of short-term debt outstanding. Based on these amounts, a 1.0 per cent change in interest rates would increase or decrease the annual finance expense by approximately $3 million (2020 - $3 million). The Corporation is also subject to interest rate risk related to debt retirement funds and provisions, as the recorded values are driven by market prices that are largely determined by interest rates. Fluctuations in the interest rates of debt retirement funds and provisions can have an impact on the Corporation. The estimated impact of a 1.0 per cent change in interest rates, assuming no change in the amount of debt retirement funds, would increase or decrease the market value of the debt retirement funds recorded through OCI by approximately $10 million (2020 - $10 million). The estimated impact of a 1.0 per cent increase in interest rates, assuming no change in the amount of provisions, would have decreased the value of the provision by approximately $9 million (2020 - $85 million). Conversely, a 1.0 per cent decrease in interest rates, assuming no change in the amount of provisions, would have increased the value of the provision by approximately $8 million (2020 - $133 million). c. 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 March 31, 2021 were as follows:
Contractual Maturities
Carrying Amount
Less Than 1 Year
More Than 5 Years
(millions)
1 - 2 Years 3 - 5 Years
Short-term debt
$
264 $
264 $
- $
- $
- - -
Trade and other payables
116
116
- -
- -
Dividends payable Long-term debt
7
7
1,485
56
56
336
2,125
Derivative instruments
(8)
7
(5)
(7)
- -
Commitments
77
77
-
-
$
1,941
$
527
$
51 $
329 $
2,125
As at March 31, 2021, the Corporation’s borrowing capacity, together with relatively stable operating cash flows, provide sufficient liquidity to fund these contractual obligations. Interest rates used in calculating financial obligations are effective March 31, 2021.
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