Notes to the Consolidated Financial Statements
The Corporation’s commodity price risk management strategy establishes specific hedging targets, which may differ depending on current market conditions, to guide risk management activities. Additionally, the Corporation uses mark-to-market value, value-at-risk and net exposure to monitor natural gas price risk. These metrics are measured and reported daily to the Commodity Risk Management Committee, a subcommittee of the Corporation’s Executive Committee. Based on the year-end closing positions, an increase of $1.00 per gigajoule (GJ) in natural gas prices would have increased net income, through an increase in the fair value of natural gas derivative instruments, by $35 million (2023 - $183 million). Conversely, a decrease of $1.00 per GJ would have decreased net income, through a decrease in the fair value of natural gas derivative instruments, by $35 million (2023 - $183 million). Based on the year-end 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 (2023 - $nil). Conversely, a decrease of $1.00 per GJ would have a negative impact on unsold natural gas in storage, by $nil (2023 - $1 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, 2024, the Corporation had $245 million (2023 - $311 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 $2 million (2023 - $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 $15 million (2023 - $13 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 $34 million (2023 - $35 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 $49 million (2023 - $51 million).
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