Cash and Capital Management

Operating activities

Cash flows from operating activities amounted to $6.8 billion in 2022, compared to $5.1 billion in 2021. This increase is partly due to the $1.0-billion growth in net income, as explained in the Consolidated Results section.

The cash flows were used to pay the dividend for 2021 and to finance a portion of the investment program, among other things.

Investing activities

In 2022, Hydro-Québec invested $4.3 billion in property, plant and equipment and intangible assets, compared to $4.2 billion in 2021. Most of this amount was allocated to large-scale asset sustainment initiatives and major development projects.

The company allocated $3.0 billion to asset sustainment. In particular, it continued to invest in its generating facilities to ensure their long-term operability and maximize their output. For instance, projects are underway at Robert-Bourassa, Bersimis-2, Beauharnois, Rapide-Blanc and Carillon generating stations. The work on these last two generating stations should also increase power to be able to meet anticipated increase in electricity demand. At the same time, Hydro-Québec allotted significant funds to the construction of transmission lines designed to reinforce its system and enhance its operating flexibility, including the 262-km 735-kV line that will connect Micoua substation, in the CôteNord region, to Saguenay substation, in the Saguenay–Lac-Saint-Jean region. It also continued to invest in upgrading and modernizing its transmission facilities. Some examples of this include the projects to replace the grid control systems, special protection systems and substation protections and controls, as well as work related to the architecture development plan for the 315-kV system on the island of Montréal. Lastly, it carried out work to optimize the operation of the distribution system and to maintain and improve the quality of its distribution assets.

Investments in development projects totaled $1.3 billion. In particular, significant funds were allocated to various projects to handle the growing customer base in Québec and increase output capacity. It should be noted that the last unit of Romaine-4 generating station, in Minganie, was commissioned in September, bringing its installed capacity to 245 MW. The Romaine complex is now fully operational, 13 years after work began.

Hydro-Québec is also continuing its transportation electrification efforts with ongoing investments in its public charging network, the Electric Circuit.

Financing activities

In a context marked by rising interest rates, Hydro-Québec carried out a number of fixed-rate issues on the Canadian capital market during the year: $2.3 billion in medium-term notes maturing in 2028, at an average cost of 3.15%, and $2.7 billion in bonds maturing in 2060 and 2063, at an average cost of 3.95%.

Sources of Financing

Type of financing

The funds raised, in the total amount of $5.0 billion, were used to support part of the investment program and to repay highercost maturing debt.

Dividend and capitalization rate

The dividend payable to the Québec government for 2022 is $3,418 million. The capitalization rate was 34.6% as at December 31, 2022.

Amount authorized by the Board of Directors Market

Outstanding as at December 31, 2022

Operating credit lines C$ or US$1,000 milliona C$3.3 million

Credit facilityb US$2,000 millionc

Commercial paperb US$5,000 million or equivalent in C$ United States or Canada C$2.9 million

Medium-term notesb US$3,000 million or equivalent in other currencies

C$20,000 million or equivalent in US$ United States Canada US$202 milliond C$13,360 milliond a) Of this amount, available balances of US$200 million, C$2 million and $496 million in Canadian or U.S. dollars are covered by operating credit line agreements with the financial institutions concerned. b) Guaranteed by the Québec government. c) Including a US$750-million swing loan. d) Net proceeds from the issuance of medium-term notes.

Credit Ratings

Commercial paper Long-term debt Outlook a) S&P Global Ratings does not provide an outlook for Hydro-Québec’s credit rating. These credit ratings are identical to those in effect on December 31, 2021.

Under the Hydro- Québec Act (CQLR, c. H-5), the dividend cannot exceed 75% of net income. Moreover, the Québec government may not declare, in respect of a given year, a dividend in an amount that would have the effect of reducing the capitalization rate to less than 25% at the end of the year.

Sources of Funds in 2022

Uses of Funds in 2022

$5.5B

$2.1B

Net change in cash, net acquisition of short-term investments and other $3.2B Repayment of long-term debt

$2.7B 2021 dividend paid in 2022

$4.3B Investments in property, plant and equipment and intangible assets