Note 11 Long-Term Debt

a) Including non-interest-bearing debts other than bonds and medium-term notes, whose present value was $1,842 million as at December 31, 2022 ($1,802 million as at December 31, 2021).

b) These debts are subject to currency risk management.

c) Certain debts carry sinking fund requirements. This fund, accounted for in Short-term investments and Other assets, totaled $721 million as at December 31, 2022 and 2021.

d) As at December 31, 2022, $49,143 million in long-term debt, net of the sinking fund, was guaranteed by the Québec government ($47,059 million as at December 31, 2021).

e) Including a perpetual debt, amounting to $272 million (US$201 million) as at December 31, 2022, and $254 million (US$201 million) as at December 31, 2021, bearing interest at the US London Interbank Offered Rate (''US LIBOR''), plus 0.0625%, calculated semiannually. On December 31, 2022 and 2021, the rates were 4.3% and 0.3%, respectively. The prior year’s data have been reclassified to conform to the presentation adopted in the current year. In the consolidated financial statements dated December 31, 2021, the perpetual debt was a separate line item on the balance sheets.

Capital repayments

The amortized cost, at the balance sheet date, of the tranches of long-term debt maturing over the 2023–2027 period is as follows:

Note 11 Long-Term Debt (continued)

Interest rates

The following table presents effective interest rates on bonds and mediumterm notes, which take into account contractual rates, premiums, discounts and issue expenses, as well as the effect of forward contracts and swaps traded to manage risks related to debt:

Credit facility and lines of credit

Hydro-Québec has an undrawn credit facility of US$2,000 million, including a US$750-million swing loan, which will expire in 2025. Any related debt securities will bear interest at a rate based on the US LIBOR, except for the swing loan, which is at the U.S. base rate.

Hydro-Québec also has access to operating lines of credit, which are renewed automatically in the absence of notice to the contrary and bear interest at the prime rate. As at December 31, the available balances on these lines of credit were as follows:

Note 12 Other Liabilities

a) The rates used to determine the present value of the estimated cash flows ranged from 0.2% to 6.4% as at December 31, 2022 and 2021. Furthermore, under the Nuclear Fuel Waste Act (S.C. 2002, c. 23), Hydro-Québec has established a trust fund to finance the cost of long-term management of its nuclear fuel waste. The fair value of the investments held in this trust fund amounts to $174 million ($182 million as a December 31, 2021). These investments were composed of debt securities issued by Hydro-Québec.

b) Including an amount of $96 million to be paid to a Québec government corporation, in connection with financial aid related to public transit electrification.

c) The prior year’s data have been reclassified to conform to the presentation adopted in the current year. In the consolidated financial statements dated December 31, 2021, this was a separate line item on the balance sheets.

Note 13 Financial Instruments

In the course of its operations, Hydro-Québec carries out transactions that expose it to certain financial risks, such as market and credit risk. Exposure to such risks and the impact on results are reduced through careful monitoring and implementation of strategies that include the use of derivative instruments.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in market prices.

Currency risk

Hydro-Québec uses currency swaps and forward currency purchase contracts to manage the currency risk associated with U.S. dollar denominated long-term debt and forward currency sales contracts to manage exposure associated with probable sales in U.S. dollars. When designated as hedging items, these derivative instruments are recognized as cash flow hedges.

Interest rate risk

Hydro-Québec uses interest rate swaps to convert certain fixed-rate debts into variable-rate debts and interest rate forward contracts to set the interest rate for certain future debt issues. When designated as hedging items, these derivative instruments are recognized based on the type of hedge, cash flow hedge or fair value hedge. In light of the hedging strategy used, the variablerate portion of the bonds was 5.7% as at December 31, 2022 (6.9% as at December 31, 2021). The rate of the previous year was recalculated to include the perpetual debt to conform to the current year’s presentation. In the consolidated financial statements as at December 31, 2021, perpetual debt was reported as a separate line item in the balance sheets.

Price risk

Hydro-Québec uses mainly commodity futures and swaps to manage risk resulting from fluctuations in energy, aluminum and petroleum prices. This aims to mitigate the impact of market price volatility on the results on the sale and purchase of electricity and purchase of fuel indexed to these prices. When designated as hedging items, these derivative instruments are recognized as cash flow hedges.

The following table presents the notional amounts of forward contracts and swaps used to manage market risk:

Credit risk

Credit risk is the risk that one party to a financial asset will fail to meet its obligations.

Hydro-Québec is exposed to credit risk related to accounts receivable and other financial assets such as cash and cash equivalents, short-term investments, the sinking fund, deposits and derivative instruments.

In terms of accounts receivable, this risk arises primarily from ongoing electricity sales inside and outside Québec. The risk exposure is limited due to Hydro-Québec’s large and diverse customer base. Management therefore believes that Hydro-Québec is not exposed to a high credit risk, particularly because sales in Québec are billed at rates that allow for recovery of costs based on the terms and conditions set by the Régie.

In order to reduce the exposure to credit risk related to other financial assets, Hydro-Québec deals with a number of issuers and financial institutions with high credit ratings. Furthermore, to offset exposure to risk related to derivative instruments, it has signed, with each counterparty, a collateral exchange agreement based on the International Swaps and Derivatives Association (“ISDA”) guidelines, which limits the market value of the portfolio. A variation of this market value beyond the agreed-upon limit will therefore result in a cash receipt or payment.